Preamble

The House met at half-past
Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

EASTBOURNE HARBOUR BILL [Lords]
(By Order)

Order for consideration, as amended, read.

To be considered upon Tuesday next.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Middle East

Mr. Churchill: asked the Secretary of State for Foreign and Commonwealth Affairs what recent steps the Government have taken to secure an abatement of the Middle East arms race ; and if he will make a statement on the Government's own policy on sales of armaments to States regarding themselves to be in a state of belligerence.

The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): We believe that the best way to secure an abatement of the arms race in the Middle East is by rapid progress towards a peaceful settlement, and we are accordingly giving our full support to Dr. Kissinger's negotiations. We are willing to consider requests from Middle East countries for arms the supply of which in our view would not endanger the achievement of a just and lasting settlement.

Mr. Churchill: Bearing in mind that, thanks to Soviet munificence, Syria alone today disposes of very nearly twice as many modern fighter aircraft and over twice as many tanks as does Great

Britain, may I ask the right hon. Gentleman whether he is aware that it is difficult to imagine that peace can long survive this volume of arms flow? Is it not high time that the West sought actively to engage the Soviet Union in the quest for Middle East peace and put the good faith of the Soviet Union to the test by seeking to make the Middle East the proving ground of détente?

Mr. Ennals: My right hon. Friend is very much aware of the dangers of the arms build-up in the Middle East as well as the conflict which exists there. Certainly, in supporting Dr. Kissinger's initiative we also support his anxiety to get the Soviet Union involved and to ensure that there is consultation between the two Governments concerned.

Dr. M. S. Miller: Will my right hon. Friend confirm that Resolution 242, which, in the words of the Prime Minister, should be taken as the framework for a settlement in the Middle East, remains 'the policy of the present Government?

Mr. Ennals: I certainly confirm that we are committed to Security Council Resolution 242, which, as my hon. Friend knows, sets out the two principles of Israeli withdrawal and Arab acceptance of Israel within secure and recognised boundaries. We also recognise that any settlement in the Middle East must also satisfy Palestinian demands for a recognition of their legitimate political rights as well as the rights of the refugees referred to in Resolution 242.

Mr. Walters: Will the right hon. Gentleman accept that the overwhelming supply of arms to the Middle East comes from the United States and the Soviet Union and that, therefore, any great reduction by Britain would have no influence at all on events except to damage British industry?

Mr. Ennals: It is certainly true, as the hon. Gentleman says, that the great bulk of weapons in the Middle East come from the United States and the Soviet Union. In replying to a Question on another occasion I made it clear that unilateral action by Her Majesty's Government would make little difference to the conflict, but we are watching very carefully the arms which are supplied to a very tense area.

Mr. Robin F. Cook: Has my right hon. Friend offered any comment to the American and Russian Governments on the supply of Lance missiles to the Israeli Government and Scud missiles to the Egyptian Government, both of which are manufactured primarily to carry nuclear warheads?

Mr. Ennals: It is not the custom, and I am not prepared, to make comments on particular proposals.

Gulf States

Mr. Luce: asked the Secretary of State for Foreign and Commonwealth Affairs if he will report on the Minister of State's recent visit to the Gulf.

Mr. Ennals: I visited Oman, the United Arab Emirates, Qatar, Bahrain and Kuwait from 4th to 18th February. My aim was to see for myself the great developments which are taking place in that region. I had wide-ranging talks with the Heads of State and with senior Ministers in each country.

Mr. Luce: In view of the strong and historical ties between Great Britain and the Gulf States, may I welcome the fact that the Minister of State undertook to visit that area? Will he say a little more about his achievements during his visit? Did he, for example, encourage the Arab States to invest some of their surplus funds in productive rather than unproductive sectors in Great Britain?

Mr. Ennals: The answer to the last part of that supplementary question is "Yes ". I did that. I discussed a wide range of issues, of which questions of investment. including investment in productive industry in Great Britain, were an important part. We also discussed other economic questions and commercial relations. There is a tremendous opportunity for an even greater expansion of British commerce and sale of technology in the area. These matters played an important part in our discussions, in addition to political questions.

Mr. Litterick: In view of the recent deaths of British soldiers in this area, will my right hon. Friend give an assurance that the British Government will cease to give military support to what one can only describe as a dirty little

réegime and a dirty little war in that area?

Mr. Ennals: I cannot give an assurance in anything like the way in which my hon. Friend refers to it. I greatly regret— I am sure the House will share this expression of sympathy— the loss of lives in a recent helicopter accident in Oman. In Oman I was very impressed with the tremendous changes which have taken place in the last three or four years and the rapid economic and social advance. I cannot call it a dirty little State at all.

Mr. Aitken: During his visit to the United Arab Emirates did the Minister of State become aware of the very real economic problems that that country is facing as a result of the massive cutbacks in oil production by the two predominantly British oil consortia? Was he able to reassure the UAE Government that these cut-backs are in no way a political conspiracy, as has been suggested, but are due entirely to commercial factors?

Mr. Ennals: I had discussions on precisely this question and I assured the Petroleum Minister of the UAE that one principal reason for the substantial cutback was precisely the price levels for oil in the UAE, and I said it would be helpful if there were a reduction. Happily, subsequently to that the UAE announced a reduction in the sulphur premium.

Diplomatic Service

Mr. Dalyell: asked the Secretary of State for Foreign and Commonwealth Affairs if he has any conveniently available figures showing how many members of the Diplomatic Service were born in Scotland.

Mr. Ennals: In selecting members of the Diplomatic Service we are not influenced by where they were born, provided that they meet the usual nationality requirements. Figures showing their place of birth are not, I am afraid, readily available.

Mr. Dalyell: Although the Scottish National Party is absent from foreign affairs Questions, may we be told what the effect would be of their talk of a separate Scottish diplomatic service?

Mr. Ennals: I think that such talk is sheer nonsense, and of course the consequence of such a move would be greatly to diminish the influence of Scots within the Diplomatic Corps. It is interesting to note that the proportion of recent recruits to the Diplomatic Service born in Scotland is about equal to Scotland's share of United Kingdom population, and the same applies to graduate entrants from Scottish universities over the past five years. If my hon. Friend looks at the Diplomatic List he will see that there are 10 pages of names beginning with "Mac ", and I think that even the Scottish Nationalists would be unhappy to see all those valuable Scots withdrawn from the Diplomatic Service.

China

Mr. Adley: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to maintain and improve relations between Her Majesty's Government and the Government of the People's Republic of China.

The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): Her Majesty's Government attach the highest importance to maintaining and improving our relations with China. The Chinese Government have welcomed a proposal that I should go there next year and my right hon. Friend the Under-Secretary of State for Trade will do so this month. We have made it clear that China's leaders will be welcome here and the Ministers for Foreign Trade and Public Health have accepted invitations in principle.

Mr. Adley: I thank the Foreign Secretary for that encouraging answer, which helps to dispel some of the unfortunate Press reports which have been circulating recently. Does he agree, however. that our relations with China are inevitably determined, in part, by the emphasis which the Chinese Government feel we put on our relations with the USSR? Will the Foreign Secretary ensure that he does not lose sight of the fact that almost the entire defence budget of the United Kingdom is now devoted towards NATO, against an ostensible threat of attack from the USSR? Wil he bear in mind our relations with the USSR when considering our relations with China?

Mr. Callaghan: I do not think that the fact that we are improving our rela-

tions with the USSR should adversely affect our relations with China. That would be a foolish way for us to conduct our foreign affairs. Our trade, cultural exchanges and other relationships in connection with air matters with China are proceeding very satisfactorily, and it will be my endeavour to push them.

Mr. Flannery: Does my right hon. Friend agree that our improved relationships with both China and the USSR can only advance the cause of people throughout the world? This applies particularly on the question of trade. At a time of economic stringency, should not every possible effort be made to deepen and intensify our trade with both those great countries?

Mr. Callaghan: I hope that on the question of aircraft sales with China, for example, the preliminary purchasing order for Concordes will certainly go ahead. We have also discussed the VC10 with the Chinese, although so far there is not very much interest in it. There are other matters in which our trade relations are improving and recent British missions to China have included groups interested in electrical, postal and telecommunications equipment. The Chinese have likewise sent here groups interested in other matters.

Mr. Eldon Griffiths: I very much welcome the prospect of the visit to China by both the Under-Secretary for Trade and the right hon. Gentleman. May I particularly urge them to press the case for British aircraft sales in that very large country, and, in particular, will the Foreign Secretary be willing to encourage joint venture manufacturing of aircraft with the Chinese in the People's Republic?

Mr. Callaghan: I can certainly give an undertaking in response to the first part of the supplementary question. I do not feel technically competent to reply to the second part. Perhaps the hon. Member will put down a Question to my right hon. Friend the Secretary of State for Trade.

South Africa (British Citizenship)

Mr. Leslie Huckfield: asked the Secretary of State for Foreign and Commonwealth Affairs how many inquiries about acquiring British citizenship were made at the offices of his Department in the


Republic of South Africa in each of the years 1972, 1973 and 1974.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): I am circulating in the Official Report details of the recorded figures for written inquiries. No records are maintained of the numbers of casual oral inquiries received.

Mr. Huckfield: Will my right hon. Friend bear in mind that South African residents were given a very long time to choose whether they wanted to assume British nationality when South Africa left the Commonwealth? Will he ask his departmental staff in South Africa to undertake an investigation into the number of South Africans who are ultimately admitted into this country as visiting aliens, then get jobs, and then become British citizens? If black South Africans, Indians or Pakistanis tried to do it, they would very soon be found out.

Mr. Hattersley: I understand and take note of my hon. Friend's point. These applications must be considered on their individual merits, and we must continue to do that.

The following are the details :


1972
372


1973
416


1974
438

Gibraltar

Mr. Brotherton: asked the Secretary of State for Foreign and Commonwealth Affairs what plans he has to visit Gibraltar.

Mr. Hattersley: My right hon. Friend has no plans to do so at present.

Mr. Brotherton: I understand that the right hon. Gentleman's travel schedule is very full, but will the Minister of State assure the House that there is no wavering in the support of Her Majesty's Government for the people of Gibraltar? What progress, if any, is being made in negotiations with the Spanish Government about both the constitutional position of Gibraltar and the reopening of the land frontier with Spain?

Mr. Hattersley: Our views on all these matters have not changed. We established what I hope is a definitive statement of attitude on Gibraltar in the preamble to the 1969 Constitution Order, a statement

established by the Labour Government at the time, endorsed by the Government which followed it, and maintained since then by us. That has been our policy since 1969 and it will continue to be so.

Mr. Greville Janner: Does that mean that there can be no question of any change in the status of Gibraltar without the consent of the people of Gibraltar?

Mr. Hattersley: It means exactly what it says, which is that Her Majesty's Government will never enter into arrangements under which the people of Gibraltar would pass under the sovereignty of another State against their freely and democratically expressed wishes.

United Nations Resolution (Compensation for Expropriation)

Mr. Blaker: asked the Secretary of State for Foreign and Commonwealth Affairs whether the amendment on the question of compensation for expropriation introduced in the Second Committee of the United Nations General Assembly on 3rd December 1974 and co-sponsored by the United Kingdom still represents the position of Her Majesty's Government.

Mr. Ennals: Yes, Sir.

Mr. Blaker: May we assume that that applies to North Sea oil licences?

Mr. Ennals: Terms for Government participation are being negotiated with the companies concerned with North Sea oil, and we intend to proceed with that by agreement.

Iran

Mr. Sproat: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the relations between the United Kingdom and Iran.

Mr. Ennals: Our relations with this rapidly developing country are close and friendly, and are expanding considerably in all fields. We are allied to Iran in the Central Treaty Organisation.

Mr. Sproat: The considerable increase in the export trade over the past year has been very gratifying, but is the Minister satisfied that his Department is doing everything it can to see that we get a proper share of this growing market.


particularly since both the Americans and the French have recently signed very much larger commercial agreements? What plans has the Foreign Secretary for visiting Teheran in the near future? Will the Minister make a comment on the recent agreement between Iran and Iraq?

Mr. Ennals: Responsibility for trade is basically a matter for the Secretary of State for Trade, although we co-operate very closely. When he was in Iran earlier in the year for meetings of the Joint Ministerial Economic Commission my right hon. Friend announced agreements involving future business for Britain worth about £500 million. That was a substantial amount. The figures for January this year— the last month for which figures are available— show that United Kingdom exports to Iran are at more than twice the level of just 12 months ago. As for future visits, my right hon. Friend the Chancellor of the Exchequer is certainly planning to visit Iran in April to attend a finance conference.

Mr. Luard: Does my right hon. Friend agree that although it is gratifying that we have improved economic and other relations with this important country, grave charges have been made in recent times about the observance of human rights in Iran? If it is the case that we have a much better relationship with Iran, will my right hon. Friend take the opportunity on some appropriate occasion of expressing the concern of many people in this country about the protection of rights in Iran?

Mr. Ennals: I have seen a report recently, which I think was published in the Sunday Times. I cannot vouch for the accuracy of that report. We are not in a position to intercede on behalf of individuals, although there is no doubt that the Government of Iran and other Governments will know the attitude of Her Majesty's Government on the question of torture. We were active on this issue in promoting a resolution which went through the General Assembly at its last session.

Mr. Tugendhat: In view of the good relations which the Minister says that this country so happily has with Iran, to what effect will he put those good relations in improving Iran's relations with Iraq and easing the suffering of the

Kurds in the light of the way that the war seems to be moving with the great increase in the number of refugees and the human suffering? What will he be doing in a humanitarian respect as regards that problem?

Mr. Ennals: It is difficult to know precisely what will be the consequences of the agreement which has been reached between Iraq and Iran. Her Majesty's Government welcome that agreement. I think that it is likely to improve relations in a number of spheres in that area. It is not for me to prophesy what its effect will be on the Kurds.

Uganda (British Assets)

Mr. Lane: asked the Secretary of State for Foreign and Commonwealth Affairs what action he has taken to get transferred to the United Kingdom the assets in Uganda of the United Kingdom passport holders expelled in 1972.

Mr. Townsend: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the latest position regarding the provision of compensation for British properties expropriated in Uganda.

Mr. Hattersley: We have continued to press the Ugandan Government for compensation for British-owned assets which have been expropriated. President Amin has very recently said that Uganda is now prepared to discuss with us compensation for British Asians. We welcome this statement and have offered to send a delegation to Kampala for the purpose.

Mr. Lane: That is encouraging, but is it not outrageous that two and a half years after their expulsion thousands of these refugees are still struggling to make a new life in this country without the help of a penny of their assets in Uganda? Will the Government intensify their efforts and put every possible pressure on the Ugandan Government in these talks until a satisfactory solution is reached?

Mr. Hattersley: I accept the hon. Gentleman's judgment about the nature of the Ugandan Government's decision. I promise him that we shall continue to do all that we can to bring this matter to a speedy and happy solution, particularly on behalf of those people who


came to Britain in virtual destitution, some of whom I am privileged to represent in my constituency.

Dr. M. S. Miller: Does my right hon. Friend have any plans to invite General Amin over here to discuss these matters with him and to confirm any new decorations which the General has conferred upon himself?

Mr. Hattersley: The Government have no plans to invite General Amin, nor, as I understand it, has General Amin any plans to invite himself.

Mr. Townsend: Will the Minister make it perfectly clear that in terms of compensation the Government will tolerate no discrimination between Asians and whites expelled from Uganda? Is it likely that the Ugandan Government will be in a position to pay the considerable sums of compensation which are now being talked about?

Mr. Hattersley: On the first part of the hon. Gentleman's question, the answer is a clear and obvious "Yes ". On the second part, President Amin has said on many occasions that his Government can pay the compensation when adequate terms are arrived at. I hope that his judgment on the economic viability of his nation is right. We shall continue to negotiate on the basis that they are able to pay when they are wining to do so.

Nuclear Weapons (Non-Proliferation)

Mr. Frank Allaun: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is now considering in connection with preventing the spread of nuclear weapons to more countries ; and if he will make a statement on the effect of his Moscow consultations on this question.

Mr. Robin F. Cook: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on what preparations he is making for the forthcoming review conference on the non-proliferation treaty.

Miss Richardson: asked the Secretary of State for Foreign and Commonwealth Affairs what preparations he is making for the forthcoming review

conference on the non-proliferation treaty ; and if he will make a statement.

Mr. Ennals: We are examining in depth the various ways in which the treaty might be implemented more effectively. As my right hon. Friend the Prime Minister told the House on 18th February, we hope that the Anglo-Soviet joint declaration on the non-proliferation of nuclear weapons will give a constructive lead to the review conference.

Mr. Allaun: Whilst supporting those proposals, will Britain give a lead and set an example by ending further nuclear tests and seeking the removal of the United States' Polaris bases from Britain?

Mr. Ennals: The Government's position on this matter has been made clear. We want a multilateral nuclear disarmament as part of a general disarmament. We look forward to the total abolition of nuclear weapons. We are not in favour of taking unilateral action. As regards Polaris, we shall maintain its effectiveness. There is no conflict between that and the Non-Proliferation Treaty. We have no intention of moving into a new generation of strategic nuclear weapons.

Mr. Rifkind: Is the Minister satisfied that the Soviet Union's concern to prevent the spread of nuclear weapons is as sincere as Britain's concern? Will he give the House an indication of the steps that the Soviet Union is taking to ensure that we move towards a system of general multilateral disarmament?

Mr. Ennals: This issue was fully discussed by my right hon. Friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs on their visit to Moscow. One of the most important declarations that came out of that visit was the declaration on this matter. We hope that it will lead to fruitful discussions between now and the NPT Conference. I have no reason to question the integrity of either of those who signed the agreement.

Mr. Cook: Does my right hon. Friend agree that the major weakness of the NPT is that there are no safeguards against the nuclear supply to non-parties? Does it not defeat the whole object of the treaty if countries which have not renounced nuclear weapons have freer access to nuclear technology and


materials than those countries which have renounced them? Is it not absurd that America can supply Egypt and Israel with nuclear reactors which are not subject to the safeguards contained in the NPT?

Mr. Ennals: We believe that constraints on the spread of nuclear weapons would be enhanced if all nuclear supplying countries were to require safeguards on the export of nuclear materials and all equipment to non-nuclear States as stringent as those designed by the International Atomic Energy Agency. We have made many proposals with the International Atomic Energy Agency, designed to promote discussions. I hope that those discussions will lead to a greater effectiveness.

Mr. Churchill: What representations did the Secretary of State for Foreign and Commonwealth Affairs and the Prime Minister make to their Soviet hosts on Britain's concern at the Soviet Union's continuing escalation of the nuclear arms race and the fact that it is currently producing 5,000 tanks a year, approximately 10 times as many as the United States— all under the cloak of détente?

Mr. Ennals: I think that the House will know from statements that have been made on the discussions that my right hon. Friends had on nuclear weapons, on MBFR and on the European Security Conference, that every attempt is being made that can be made by agreement to reduce the level of armaments.

Miss Richardson: Does my right hon. Friend not agree that this country has not fulfilled its obligations under Article 6 of the non-proliferation treaty, and that it would be better to go to the review conference in May with some kind of commitment?

Mr. Ennals: I do not accept that we have not fulfilled our obligations. I think that we shall go before the review conference having been extremely active in this field, and strengthened by the deliberations that took place in Moscow. There is still some time before the review conference starts, but we shall certainly go into it in a positive mood.

Mr. Amery: The Minister, if I heard him aright, made a surprising unqualified statement. He appeared to me to say that the Government have no intention

of moving to another generation of nuclear weapons irrespective of whether or not there is multilateral nuclear disarmament. Did I understand him aright? If so, is not this a new statement of policy with very dangerous implications?

Mr. Ennals: I did not make any new statement of policy this afternoon.

Portugal

Mr. Farr: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his official visit to Portugal.

Mr. James Callaghan: I would refer the hon. Gentleman to my replies to the hon. Members for Moray and Nairn (Mrs. Ewing) and Epping Forest (Mr. Biggs-Davison) on 17th and 19th February respectively.— [Vol. 886, c. 309 and c. 1319.]

Mr. Farr: I am grateful to the right hon. Gentleman for what he said. In view of the serious events of the last two days, will he say whether any British lives or property have been affected by the recent outbreak of fighting? In the attempt to secure democratic elections in Portugal, was the advice of the Council of Europe sought? That, I understood was the right hon. Gentleman's objective a few weeks ago in advising the Portuguese interim Government on how a democratic election should be held.

Mr. Callaghan: In reply to the first part of the supplementary question, although information is not complete, I have no reports that any British subjects have been injured or even directly endangered as a result of what has happened. As to the Council of Europe's role, I am not up to date with that, but, if I may venture an opinion without intruding on Portuguese internal affairs, in view of my recent visit, I would utter the obvious remark that violence has no part in the proper democratic process. In view of my detailed discussions with some of the leaders of the Armed Forces movement who have such great influence in the country, I hope that they will use that influence to hold the ring, so that the democratic parties may conduct without interference the election which is due to take place on 12th April.

Mr. Newens: Did my right hon. Friend make clear that in no circumstances would


the British Government be prepared to approve intervention by the American CIA to subvert and destabilise any progressive democratic regime in Portugal, as the CIA has done in Chile and numerous other countries? Will he also make that clear to Mr. Henry Kissinger, whose association with what happened in Chile is well known?

Mr. Callaghan: I do not think that there is much point in extending what happened in one country to what might happen in another without any evidence. I know that allegations have been made, but I am not aware of any evidence in that direction. My understanding of American policy is that it would not be directed to the ends suggested by my hon. Friend.

Mr. Maudling: Is the Foreign Secretary aware that there is great concern on the Opposition benches— I am sure he shares that concern— about the present situation in Portugal and the threats of violence to democratic movements and parties? Is he also aware that any contribution which he, as Foreign and Commonwealth Secretary, can properly make towards solving or helping to solve this problem will have the support of the entire House?

Mr. Callaghan: Yes, Sir. I am in touch with Dr. Mario Soares, the Foreign Minister of Portugal, and, although every country must conduct its own affairs, he knows that he has the support of the British Government in endeavouring to ensure that the elections to be held on 12th April are carried out fully and without fear.

Southern Africa

Mr. Kinnock: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on developments in Southern Africa since his visit to the Republic of South Africa.

Mr. James Callaghan: I reported to the House on 14th January on my return from Africa. As regards Rhodesia, I regret to say that the recent detention of the Reverend Sithole has resulted in the discussions that had begun between the ANC and Mr. Smith's representatives being broken off. I am keeping in touch with the various Governments concerned about this and other issues.

Mr. Kinnock: Does my right hon. Friend accept that the detention of the Reverend Sithole demonstrates either the superficiality or the ineffectuality of South African pressure on the Rhodesian régime, and that neither of these apartheid régimes understands the language of diplomacy? Should not my right hon. Friend be speaking to them in harsher tones if he expects them to come into accord with the rest of the democratic world?

Mr. Callaghan: There is contact between all the Governments of Southern Africa with each other and with the United Kingdom Government, and I am satisfied that there is a common view that the Reverend Sithole, having been detained, should be brought to trial. Indeed, the South African Government said that there should be an open trial in this case. We support that view.

Mr. Rifkind: Will the Foreign Secretary confirm recent reports that South African troops have been withdrawn from the front line in Rhodesia, and will he say to what extent South African troops are still present in Rhodesia?

Mr. Callaghan: My understanding, from a number of sources, is that South African police have been withdrawn from the frontier and are now concentrated in camps in Rhodesia. They are in a position of self-defence, but they are not going on so-called hunting expeditions, which is what was complained of at the time by African representatives.

Mr. loan Evans: Does my right hon. Friend agree that if South Africa withdrew support from Rhodesia tomorrow the illegal régime would collapse? Will he bring pressure to bear on South Africa to ensure that the constitutional talks move forward to majority government in Rhodesia at an early stage?

Mr. Callaghan: I believe that the South African Government are fully aware of the consequences of the intransigence being shown by the Rhodesian régime. They must conduct their own affairs as they think best in this matter, but there is no doubt that Mr. Vorster has a strong desire to secure better relations with his neighbours in Southern Africa, and he knows that this will imply a number of changes in policy.

Mr. Tugendhat: I agree entirely with what the Foreign Secretary has just said, but does he not agree that the impending independence of Mozambique creates a new situation with regard to Rhodesia's trading position and that Rhodesia will, from the moment of Mozambique's independence, be totally dependent on South Africa for its links with the outside world? Therefore what-evil- Mr. Vorster may do with regard to direct negotiations, the trading position of Rhodesia is something on which he will have to make a decision, and that is a matter which should surely be of concern to the United Kingdom?

Mr. Callaghan: Yes, Sir. If the hon. Gentleman is right, clearly the conclusions follow. We are not yet aware of the extent to which trading will still be permitted through Mozambique, however.

Rhodesia

Mr. Gould: asked the Secretary of State for Foreign and Commonwealth Affairs whether it is still the policy of Her Majesty's Government to promote the international application of sanctions against the illegal Rhodesian régime.

Mr. James Callaghan: Yes, Sir.

Mr. Gould: Is my right hon. Friend aware that the Committee of the European Coal and Steel Community recently approved the grant of financial aid to a research project in which the Rhodesian Iron and Steel Corporation would participate? Will he ensure, when this matter is further discussed tomorrow in Brussels by the research project sub-committee, that the British policy of sanctions is properly represented and adhered to?

Mr. Callaghan: I understand that the International Pig Iron Secretariat has drawn up a revised proposal in which Rhodesia is not involved. I hope that that is true, because I certainly agree with my hon. Friend that there should be no en-encouragement of EEC countries to trade with Rhodesia. At my instigation the European Community set up a committee of experts six months ago to try to block the loopholes.

Mr. Marten: Which countries in the Common Market are concerned in sanctions-busting in relation to Rhodesia, and what action is being taken against them.

apart from the committee which is considering it?

Mr. Callaghan: The Customs experts of the Nine, again at my suggestion, met at the end of last year to pool their experience, and a number of countries are co-operating effectively in investigating a number of suspected breaches of sanctions. I hope that the hon. Gentleman will not carry his opposition to the EEC to the point of suggesting that it is ineffective for us to use our weight in the EEC to make sanctions effective. That is what we are doing at the moment, and we are doing it much more effectively than we did previously.

Mr. Marten: At my suggestion.

Mr. Callaghan: Very good. That is co-operation.

New Zealand (Foreign Minister)

Mr. Rifkind: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will seek to have a meeting with the New Zealand Foreign Minister.

Mr. James Callaghan: I recently had the pleasure of meeting Mr. Rowling here in London.

Mr. Rifkind: Will the Secretary of State confirm the glad tidings which were reported this morning about the future of New Zealand and its relations with the Community? Will he say whether there were any discussions on the position as it affects New Zealand after 1980, or whether it will be subject to review in 1980?

Mr. Callaghan: It will be subject to review again before 1980. I have no doubt from the nature of the discussions yesterday that satisfactory arrangements will continue to be made.

Cyprus

Mr. Watkinson: asked the Secretary of State for Foreign and Commonwealth Affairs what further steps he is taking to assist bringing about a peaceful solution to the Turkish/Cypriot situation ; and if he will make a statement.

Mr. James Callaghan: The situation in Cyprus continues to cause much concern. We are playing an active part in the Security Council's deliberations in


New York, which I hope will result in the renewal of the intercommunal talks. A statement on Cyprus was made yesterday by the European Community meeting in Dublin, and last week I had conversations with the American Secretary of State, who is undertaking discussions on Cyprus also during his present Middle East visit.

Mr. Watkinson: I thank the Foreign Secretary for that reply. I think he will agree that there is a danger of further military engagements so long as the present situation continues. What is the risk to Nicosia Airport at present, and what is the Government's intention in regard to the base at Dhekelia?

Mr. Callaghan: The assurance of the future of Nicosia Airport is one of the issues which we have pressed Mr. Clerides and Mr. Denktash to undertake. If we can get the intercommunal talks resumed, we have asked them to give the matter a high priority. As regards Dhekelia, our position has been made clear a number of times. It is not part.of the Republic of Cyprus. It is a sovereign base.

Mr. Maudling: We are glad that there is the prospect of further progress for discussions. However, will the right hon. Gentleman do all he can to help British residents and British wives of Greek Cypriot citizens, who are suffering considerable hardship?

Mr. Callaghan: I feel that the position of former British residents is extremely unsatisfactory in many ways. We have tried to find a number of openings to pursue, but so far we have not been very successful. I am open to any suggestion from any hon. Member or others as to how we can follow up the matter.

New Zealand and Australia

Mr. Tinn: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the Prime Ministers of New Zealand and Australia about Great Britain's future within the EEC.

Mr. William Hamilton: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the Prime Ministers of New

Zealand and Australia about Great Britain's future within the EEC.

Mr. James Callaghan: During their visits to this country, in December 1974 and February 1975 respectively, the Prime Ministers of Australia and New Zealand were given a full account of our renegotiation aims.

Mr. Tinn: Does my right hon. Friend feel that the Prime Ministers will share the satisfaction of most of us at the considerable success achieved in the renegotiation of the treaty? Will he comment on the prospects for New Zealand in the 1980s, and may we have some sort of reassurance on that issue?

Mr. Callaghan: Both Prime Ministers have properly made it clear that the renegotiation of our terms of entry is a matter for the British Government, Parliament and the people of this country. Although there have been references in the Press about their view, I must point out that they have not given me any official indication of their view on these matters.

Mr. Adley: Shilly-shallying.

Mr. Callaghan: No— preserving the constitutional position. As regards the situation of New Zealand after 1980, I refer my hon. Friend to my remarks a few moments ago. That matter will come up again for discussion. When he reads the terms of the declaration issued yesterday, he will see that there is the intention that New Zealand, while continuing to diversify her trade, should be able to maintain close links with this country.

Mr. Eldon Griffiths: In view of Mr. Trudeau's recent remarks, are not the Prime Ministers of the three old Commonwealth nations now unanimous in the view that they would prefer to see Britain remain a full member of the Community? Did the Foreign Secretary give to the Prime Ministers an undertaking that he and the Prime Minister of the United Kingdom will campaign to ensure that a result is achieved which those old Commonwealth countries want to see.

Mr. Callaghan: The hon. Gentleman can interpret their views as he thinks fit, but it is for them and not for me to give their views on this subject. He will no doubt put on them his own interpretation. As for the second part of the question,


they would have regarded it as counterproductive to have made such a request and would not have had any kind of reply.

Mr. Evelyn King: Am I not right in believing that, internationally, almost the only opposition to our entry comes from Russian and the Communist bloc?

Mr. Henderson: And Scotland.

Mr. Callaghan: I do not know about those countries, but I seem to have heard complaints nearer at home.

Mr. Fernyhough: Does my right hon. Friend agree that exports last year from Britain to the old Commonwealth were higher per head of population? Will he do what he can to see that they remain our best customers?

Mr. Callaghan: I hope that is true. If so, it would show that, whatever the merits or demerits of the EEC, our membership has not prevented that kind of expansion.

Renegotiation

Mr. Moate: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the progress of the renegotiations of the terms of United Kingdom membership of the EEC.

Mr. Marquand: asked the Secretary of State for Foreign and Commonwealth Affairs if the EEC renegotiation objectives outlined in his statement to the Council of Ministers on 1st April 1974 have yet been achieved.

Mr. Cryer: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the renegotiations on the EEC.

Mr. Jay: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the summit meeting of EEC member countries in Dublin in March.

Mr. Hurd: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a further progress report on the negotiations which he is conducting on British membership of the EEC.

Mr. James Callaghan: Outstanding renegotiation matters were discussed at the Council of Ministers meeting on 3rd-4th March and at the Heads of Government meeting in Dublin on 10th-11th March. My right hon. Friend the Prime Minister will be making a statement on the outcome of the Dublin meeting later this afternoon.

Mr. Moate: In the meantime, may 1 remind the right hon. Gentleman of the passage in Labour's manifesto and the White Paper that the taxes which form the so-called own resources" of the Community are unacceptable to the Government? Will he assist us by measuring the terms in the manifesto against the terms agreed by saying whether the taxes arising from, say, imported foodstuffs into Britain will belong to Britain or to the Common Market?

Mr. Callaghan: They will belong to the Common Market.

Mr. Marquand: Is my right hon. Friend aware that perhaps the most important single aspect of the objectives set out in his speech to the Council of Ministers, which were the objectives set out in the Labour Party manifesto, refer to this country's right to plan our internal affairs in a Socialist direction? Will he take this opportunity of scotching the rumour that there is anything whatever in the membership of the Common Market to prevent a Labour Government carrying out the sort of measures included in the Industry Bill which is now before a Standing Committee?

Mr. Callaghan: I have no intimation at all from the Commission of any difficulties in carrying out the proposals included in the Labour Party's manifesto on the National Enterprise Board or the Bill which is now before the House.

Mr. Hurd: Will the Foreign Secretary say a little more about the Community's attitude towards regional policies? Does he feel that the Commission, in light of the renegotiation, is striking a reasonable balance between the encouragement of national policies and restraining the auction in regional aids which would be damaging to everybody?

Mr. Callaghan: Subject to the view of my right hon. Friend the Leader of the House, this matter will be debated.


I hope that we shall have a full debate in order to remove a number of misapprehensions which are being spread. Having taken a very active part in the discussions which led up to the issue of the Commission document, I believe that it preserves a proper balance between the right of individual nations to take action to avoid unemployment in development areas and any overbidding which can result from an auction, perhaps, by the better-off nations to secure industries in regions where we would not wish them to go.

Mr. Cryer: Does my right hon. Friend agree that now the charade of renegotiation is over and we are about to enter a referendum campaign, he should recommend that his civil servants be given paid leave of absence similar to that which has been given to Sir Christopher Soames and Mr. George Thomson, who are now propagandising on behalf of the EEC? Will he assure the House that a reply will be forthcoming fairly soon to the letter written by my hon. Friends and myself on the subject of the relationship between the EEC and the Industry Bill?

Mr. Callaghan: On the first part of my hon. Friend's supplementary question, I know that we shall see a number of strange bedfellows, but I am surprised that he should associate himself with editorials in the Daily Mail. The answer to the second part of the supplementary question is that I hope that there will be a reply fairly soon.

Mr. Henderson: Will the Foreign Secretary remind his colleagues that "Scotch" and "Welsh" are words which have a different significance for many of us? I do not know whether there is a word for Ulster. Will he accept that in Scotland there is deep disappointment that he has done nothing to change the common fisheries policy which will apply in 1982? What hope does he hold out for our fishermen to retain control of the right to fish in their own waters, when EEC fleets are allowed to mop them dry, as has happened around their own coasts?

Mr. Callaghan: On the first part of the hon. Gentleman's supplementary question, I am always careful, if ever I use the word, to put in the letter "c ", mak-

ing it "welch "— and I would not dream of using the word "scotch" with a "ch" or an "s ". I only drink it.
As regards the fisheries dispute, I have written to the hon. Gentleman's colleague about it, and I shall be glad to discuss it further at any time.

Mr. Blaker: Will the right hon. Gentleman say what would be the consequences for our trading position if, in spite of what appear to have been successful negotiations, we ever left the Community? Should we not have to embark on a series of fresh negotiations with a large number of countries— not only the EEC and EFTA but the Lomé countries, and others? Might not those negotiations take a considerable time, during which British industry would remain in a state of uncertainty?

Mr. Callaghan: In answer to a supplementary question I would not wish to embark on the thorny path which the hon. Gentleman has invited me to tread. As I said earlier, clearly it would be a traumatic experience if we had to de-negotiate our way out, having renegotiated our way in.

Mr. Jay: Will my right hon. Friend confirm that no decisions were taken in Brussels on Commission documents concerning the stocktaking of the common agricultural policy and, therefore, that the renegotiation of the CAP has been omitted from these renegotiations?

Mr. Callaghan: In answer to the first part of my right hon. Friend's question, Yes, Sir ". In answer to the second part, "No, Sir ". There has been a substantial change in the agricultural policy which most people, except my right hon. Friend, recognise.

Mr. Willey: asked the Secretary of State for Foreign and Commonwealth Affairs if the renegotiation of the terms on which the United Kingdom entered the EEC has now been completed.

Mr. Roper: asked the Secretary of State for Foreign and Commonwealth Affairs what matters now remain to be renegotiated with the European Community.

Lord James Douglas-Hamilton: asked the Secretary of State for Foreign


and Commonwealth Affairs what issues are still outstanding in the renegotiation of the terms of entry to the EEC.

Mr. Marten: asked the Secretary of State for Foreign and Commonwealth Affairs when he hopes to complete the renegotiations with the EEC.

Mr. Tim Renton: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on which matters of importance remain outstanding in the EEC negotiations.

Mr. James Callaghan: As a result of the meeting of Heads of Government in Dublin which concluded yesterday, my right hon. Friend the Prime Minister and I are satisfied that we have now taken the issues which have been under negotiation since last April as far as possible, and there are no other issues that we intend to raise in advance of the referendum.

Mr. Willey: Is my right hon. Friend aware that the House will want an early opportunity to congratulate him and his colleagues on their achievement and success?

Mr. Callaghan: That was so surprising that I could not believe that my right hon. Friend had reached the end of his supplementary question. I am grateful to him.

Lord James Douglas-Hamilton: Does the right hon. Gentleman accept that if Britain withdraws from the Common Market it will be likely to lead to rising and heavy unemployment in Scotland?

Mr. Callaghan: These are issues which are better for debate than for answers to supplementary questions. They are all complicated matters, and I am trying to approach them in a manner which will satisfy Britain's interests and not the interests of those who have particular views one way or the other.

Mr. Roper: May I congratulate my right hon. Friend on reaching agreement yesterday with our partners in Dublin? Is not some tribute also due to our Community partners for showing such a cooperative attitude— especially our Socialist comrades, the Federal German Chancellor and the Prime Ministers of the

Netherlands and Denmark, for showing us such solidarity?

Mr. Callaghan: It seems as though the electioneering season has started rather early. As regards the attitude of our Community partners, there was no doubt that there was a very strong desire on their part to ensure that, so far as they were able, the United Kingdom should remain a part of the Community. There is no doubt that this actuated their replies to the requests that we have made during the past 12 months— and that should weigh with disinterested people when they are making up their minds on this issue.

Mr. Marten: As one of the objectives of the Government's renegotiation, as set out in the Labour Party manifesto, was to ensure the retention by Parliament of the powers that we need to pursue effective regional, industrial and fiscal policies, and as the power of decision over State aids is subject to the provisions of the treaties of Rome and Paris, if the negotiations have succeeded will those treaties be amended accordingly?

Mr. Callaghan: No, Sir. I am satisfied that the practice of the British Government in regard to industrial policies and the curing of unemployment will not be jeopardised by the agreements that we have made.

Mr. Spearing: In spite of what my right hon. Friend said about fiscal and employment policies, will he confirm that if this country remains a member of the Community we shall be comitted to economic and monetary union? If so, how can he guarantee what he said to the hon. Member for Banbury (Mr. Marten)?

Mr. Callaghan: There are a number of matters to which we are committed, such as universal disarmament, but I do not expect it to arrive tomorrow. The same is true of economic and monetary union—

Mr. Jay: By 1980.

Mr. Callaghan: It is no use some of my right hon. and hon. Friends fighting these old battles over and over again. I hope that we shall not get excited about it. Those who do not want to accept it will not accept it—[AN HON. MEMBER : "he Tories will."] I do not care who does and who does not. I am only giving my best


judgment to the House. That judgment, whether or not it is accepted, is that economic and monetary union is unlikely to come for many years, and that when it comes it will only be when all the members of the Community are ready to adopt it.

Mr. David Steel: The right hon. Gentleman was careful to say that there were no new matters which the Government propose to raise before the referendum. Does not this underline the fact that renegotiation is not a process with a certain begin ning date and a certain ending date but a continuing factor in our membership? Have not the Govenrment given notice that they propose thereafter to pursue the question of the steel policy of the EEC?

Mr. Callaghan: That is partly true and partly not. In the Labour Party manifesto, which was voted on by the country, we set out a number of issues on which we wished to have some satisfaction and some changes. Those changes have been carried as far as we think it is possible and proper to carry them. After the British people have taken the decision, if we are out, that is the end of it— certainly the end of any further negotiations — but, if we are in, there will be a number of matters on which we shall continue to try to fight for and support British interests as against everyone else's, but looking at the situation in the light of the general interests of Europe as a whole.

Mr. Hooley: Is my right hon. Friend aware that on 7th December the Prime Minister said that the question of steel would be included in the renegotiations? What progress was made on this matter?

Mr. Callaghan: At the Council of Ministers, I intimated that if the referendum were decided in such a way that Britain remained a member we should wish to pursue the problems concerning steel investment and to review other problems. Yesterday, my right hon. Friend the Prime Minister reinforced what I said at the Council of Foreign Ministers.

Mr. Eldon Griffiths: Does not all that the right hon. Gentleman has said with

great robustness today demonstrate the essential flexibility and stability of the Community to the needs of its members? Does the right hon. Gentleman agree that he has succeeded— we are glad about it — in obtaining the accommodation of the Community to the needs of Britain, as we on the Opposition benches always expected and felt confident that we would?

Mr. Callaghan: There is no doubt that during the course of the past 12 months a number of changes have been made in the policies of the Community, as a result of our presence there and of the activities of a number of Ministers. I believe that it has become a more outward-looking body than it was before. In relation to the developing countries, for example, it is embarking upon new policies which are bound to help the developing world.

Mr. Mike Thomas: My right hon. Friend has confirmed that the renegotiations are now complete. Will he give us his personal view on the question whether the terms of the manifesto on which Government supporters fought the General Election have been met?

Mr. Callaghan: I certainly hope to join the Prime Minister in expressing a view to the Cabinet. That is the first place in which it should be put.

Mr. Ronald Bell: Does the Foreign Secretary agree that nothing in what he has negotiated about in recent months will have the slightest effect on the extent to which we are governed and our policies are controlled from Brussels?

Mr. Callaghan: I do not think that it will have much effect, but I think it is quite clear that the United Kingdom Government will be able to maintain control over their own basic affairs.

Mr. Hooley: On a point of order, Mr. Speaker. Has my right hon. Friend the Chancellor of the Duchy of Lancaster indicated to you that he wishes to answer Question No. 60?

Mr. Speaker: No.

EEC (EUROPEAN COUNCIL MEETING)

The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I would like to make a statement about the meeting of the European Council of the Heads of Government of the European Community held in Dublin on 10th and 11th March at the invitation of the Prime Minister of the Republic of Ireland.
The Council dealt with six main questions : the outstanding renegotiation issues of a correcting mechanism for the Community budget and access after 1977 for New Zealand dairy products ; the economic situation in the Community ; energy ; the Conference on Security and Co-operation in Europe ; Cyprus ; and the British Government's proposals on the subject of raw material and food supplies, which we shall, of course, also be discussing at the forthcoming Commonwealth Heads of Government meeting in Jamaica.
The Council agreed statements on the Conference on Security and Co-operation in Europe ; energy ; Cyprus ; and imports of New Zealand dairy products ; and, after the meeting, Mr. Cosgrave made a statement on the budget correcting mechanism. Copies of these documents have been placed in the Library and will. with permission, be published in the Official Report as an annex to this statement.
I also supplemented what my right hon. Friend the Foreign and Commonwealth Secretary had said at the Foreign Ministers' Council in Brussels on 3rd March on the subject of steel.
The Council had a long discussion about the Conference on Security and Co-operation in Europe. We welcomed the progress that had already been made in Geneva and the hopes for sufficient further progress to be made from now on to enable the conference to be concluded by a meeting to be held at an early date at Heads of Government level.
On energy the Council decided that preparatory work for the forthcoming International Energy Conference of Consumers and Producers should be carried out by a new high-level Community committee reporting to the Council of Ministers, and that the European Council itself should meet again at the appro-

priate moment to prepare for this conference.
In the discussion on the supply of raw materials and food I outlined to the Council the Government's general approach to the need for further cooperation between developed and developing countries in respect of supplies and prices of raw materials and primary commodities. Our proposals carry further the ideas which my right hon. Friend and I discussed with President Ford and Secretary Kissinger and will build on both the World Food Council decisions and the stabilisation proposals of the Lome convention. I made clear to the other Heads of Government that we hope to develop further the initiative we have taken when we attend the Commonwealth Prime Ministers' meeting.
On renegotiation, we reached agreement on the budget correcting mechanism and on access and pricing provision for New Zealand dairy produce.
Our agreement on the correcting mechanism for the budget was based on the proposals made by the Commission. I do not need to take the time of the House with a description of the Commission's proposals, since they were the subject of a debate in this House on 27th February. Certain suggestions made this week for modifying those proposals— suggestions which would have had the effect of making them less favourable to us— were not accepted. On the other hand, we got them improved. The House will be able to study the changes in the documents which are being circulated in the Official Report. The two main changes were on the operation of the balance of payments criterion and on the proposed limits on refunds, two issues which were strongly urged on the Government in the debate by hon. Members on both sides of the House.
Under the balance of payments criterion proposed by the Commission, a member State would have ceased to be eligible for a budget refund if it had run a balance of payments surplus on average for three years. This criterion was modified so that even if a country has a balance of payments surplus on average over three years it can continue to qualify for a refund related to its VAT contribution, provided that it meets the other criteria.
On the limits on refund, the Council agreed to drop the Commission's proposal that refunds should be limited to two-thirds of the amount by which a country's share of the budgetary contribution exceeded its share of the Community's GNP. We got rid of the two-thirds limitation. Instead, the Council agreed upon a ceiling of 250 million units of account on the amount of a refund to any qualifying country in any single year. This would give a refund at current exchange rates of up to about £125 million in any year to a member State that qualifies. It was also agreed that if and when the total Community budget came to exceed 8,000 million units of account, the ceiling from then on should be 3 per cent. of the budget total.
The arrangements which the Community has now agreed would, if Britain remains a member of the EEC, give us an assurance of a repayment of hard cash if we found ourselves in the future paying an unfair share of the Community budget.
On New Zealand dairy products, the Heads of Government were concerned not with the detailed arrangements for access after 1977 but with laying down the political guidelines on which the decisions on these matters are to be prepared. These represent a substantial improvement on the existing protocol. First, it was agreed that annual imports of butter for the first three years after 1977— from 1978 to 1980 — may remain close to deliveries in 1974 and 1975. The Heads of Government accepted what had been strongly urged upon us by the New Zealand Government— the need for periodic review of the prices received by New Zealand— and provided for these to be adjusted as necessary to take account, among other things, of future developments in the levels of Community intervention prices. In the existing protocol signed in 1972 the special arrangements for cheese expire altogether after 1977, but it is now accepted that this creates problems which, in the words of our agreement yesterday, will be examined by the Community with due urgency. In other words, we have now kept open the option for some continuing imports of New Zealand cheese after 1977 when they were due to cease under the 1971 terms. The Commission has been invited to bring forward its report for the review of the

protocol together with the necessary proposals. I would expect this to be done during the summer.
I made clear to the other members of the Council that, with these agreements on the budget and on New Zealand, we had now taken our discussions within the Community on renegotiation as far as they could go. The Cabinet will shortly be reviewing what has been achieved over the last year in the renegotiation as a whole on the basis of the objectives set out in our party manifestos of February and October last year. I expect to announce the Government's decision to Parliament before the Easter Recess.

Mrs. Thatcher: The Prime Minister has made a long and complicated statement and we shall need to look at the documents involved and consider them.
I should like to put two points to the right hon. Gentleman. First, will he confirm that he received maximum cooperation and good will from all the other Heads of Government at Dublin, indicating their capacity to be flexible within the treaty and their desire to help him and Britain in tackling the problems involved?
Secondly, will he now use his personal authority to recommend that we stay in Europe?

The Prime Minister: I agree with the right hon. Lady that the House will need to study these somewhat complicated documents before forming a view of the provisions that I have briefly summarised this afternoon. 
The right hon. Lady asked whether I could confirm that we received the maximum co-operation and good will. I can certainly confirm that. It was an extremely friendly and constructive conference. Despite forecasts or headlines there was no confrontation. There was a real desire to solve these problems. But these problems would never have been brought forward for decision if we had not insisted on renegotiation a year ago. Certainly the Heads of Government showed every desire to help.
On the right hon. Lady's second question, the Government's decision will be made before Easter. The recommendation on which the Cabinet decides, whether to stay in or to come out of the Community—

Mr. Skeet: What is the Prime Minister's view?

The Prime Minister: — will be announced to Parliament, I expect, before Easter.

Sir G. de Freitas: Is my right hon. Friend aware that there is on this side of the House a great deal of support for what he and my right hon. Friend the Foreign and Commonwealth Secretary have achieved?

The Prime Minister: I am grateful to my right hon. Friend. I should like to make it clear, in case of any misunderstanding, that in the renegotiations, apart from the other major issues which we discussed, we were dealing in the main with only two questions. I have said that I enlarged on my right hon. Friend's statement on steel. The other items had been taken as far as they could go—for good or ill, which is for every hon. Member and the country to decide—in meetings before the Dublin meeting as a result of the patient and constructive negotiations of my right hon. Friend.

Mr. Thorpe: Is the right hon. Gentleman aware that many of us are delighted that after a period of high drama and calculated suspense the right hon. Gentleman has brought back exactly what we always expected, namely, terms that he could enthusiastically recommend to his Cabinet colleagues? May we wish him well in trying to convert even those of his colleagues who, whatever the terms, are anti-European? May we await the moment when he will recommend to the British people their acceptance of our stay in Europe? But may we just remind him that if we have to pay a bill of £8 million every time the Government cannot have a collective Cabinet view it will get rather expensive.

The Prime Minister: The right hon. Gentleman has shown over the years that his desire was to be in Europe regardless of the terms. He just dismissed the terms. He opposed what we said in our two manifestos about the need to renegotiate the terms, which we regarded as profoundly unsatisfactory and on which we have made considerable progress.
I thought that I heard the right hon. Gentleman say in the October election, though it may have been in February, that

if the Labour Government won the election he would give co-operation and support in the referendum. I shall be looking at last night's Division lists a little later.

Mr. Jay: Has the EEC Council yet agreed to a fundamental reform of the common agricultural policy?

The Prime Minister: I think that my right hon. Friend the Foreign and Commonwealth Secretary dealt with that this afternoon.

Hon. Members: No.

Hon. Members: Yes.

The Prime Minister: There seem to be two views about that.
The stocktaking and the fundamental review called for by the Federal German Chancellor at the December Summit in Paris, and strongly supported by me, is taking place. Already, as a result of our renegotiation over the past year, fundamental changes have taken place. As a result of our saying that we could not go on with such things as the beef mountain, there have been big changes. I cannot, and shall not, say that the fundamental review has been completed, because that is not so.

Mr. John Davies: Will the Prime Minister clarify whether within the corrective mechanism any compensation becoming due would be limited to the extent of the VAT contribution?

The Prime Minister: I thought that I had explained that. I am sure that the right hon. Gentleman, with his expert knowledge of the subject, will want to study the documents. There is a limit of 250 million units of account in respect of a country if certain qualifications are fulfilled. I said in my statement that we have had the Commission proposals for the balance of payment deficit requirements changed so that if, after three years, there has been a surplus on a moving average, there will be a limit to the refund.

Dr. J. Dickson Mahon: My right hon. Friend referred to world aid. Will he confirm that the negotiations on aid and the signing of the convention at Lome represent a substantial advance in principle towards helping the hungry nations,


and in that respect is greater than anything done by the Soviet Union or the United States of America?

The Prime Minister: Before I answer that question, may I make it clear, in case I did not make it clear to the right hon. Member for Knutsford (Mr. Davies), that duties and levies, as well as VAT, are taken into account in the computation of what is due for refund.
Both in the House and elsewhere I have paid tribute to what was achieved in the Lome Convention, not only on aid but on the beginning of a significant scheme for stabilisation of the prices of primary commodities, as an incentive to help primary producers all over the world to maintain production and avoid boom and bust, both for world food and for essential raw materials, feeding stuffs and fertilisers.
Her Majesty's Government have taken an initative in Washington to build on the World Food Council and on other actions which we and others have taken. The matter will be pursued in Jamaica.

Mr. Marten: In spite of the Wilson fan club which is building up on this side of the House, will the Prime Minister set a good example by referring to the Common Market and not to Europe? Like so many distinguished people on this side of the House, he seems to confuse the two.
Will the right hon. Gentleman undertake to re-read the Labour Party election manifesto, which I have here, and then to state clearly where the renegotiations fall short of the objectives set out in the manifesto, so that the electorate may know how far they can rely on the pledges given by the Labour Party at a General Election?

The Prime Minister: I hope that I always use the correct phraseology here. I do not use the word "Europe" to cover the area of the Nine. Europe goes much further, to the north, south and east of the Nine. I think that today I have used the phrase "the European Community ". I hope that that is all right.
I am glad that the hon. Gentleman carries the Labour Party manifesto around with him, as I do. I welcome

his ambition to join me as the custodian of the manifesto. Not only do I know it, I am sure, as well as he does, but my right hon. Friend the Foreign and Commonwealth Secretary has at all times stressed in the negotiations the exact wording. It is now for all of us and for the country to decide how far the manifesto terms have been achieved. As to 100 per cent., they obviously have not. I have referred to the CAP. But we must all form our own views as to how far the terms have been achieved.
I do not think that the hon. Gentleman will quarrel with my statement that but for the renegotiation and the terms I have announced we should still be stuck with the totally inadequate terms that the right hon. Lady the Leader of the Opposition and her colleagues fell over themselves to accept. As far as I know, she has not dissociated herself in this respect from the actions of the Government of which she was a member at the time.

Mr. Buchan: Does my right hon. Friend agree that the kernel of the common agricultural policy problem was stated in the manifesto specifically to be the removal of food taxes and those matters which impeded trade with the Third World? Has the failure on that front been a failure in the renegotiations, or was there no attempt to remove the various levies and taxes?

The Prime Minister: We have tried to make the maximum progress on this matter. The manifesto criticised the way in which the CAP had been constructed. It went on to refer to the need for continuing access of food from outside sources. My hon. Friend will be delighted with the fact, although some people in this country seem to get rather bored by the matter, that we made such an issue of the entry of New Zealand products into this country, which had been thrown away by the previous Government.

Mr. Donald Stewart: Does the right hon. Gentleman accept that the Dublin meeting had all the reality of wrestling on television, and that the contestants, despite the grunts and cries of pain, did not intend to do any real damage to each other, and that, in fact, the real fight is the contestants versus the spectators? Does he accept that a great deal of regret


will be felt in Scotland at the fact that nothing has apparently been achieved on such matters as fishing, energy and steel? Will he accept that whatever his partners in the Common Market are, the very last thing they are are Socialist comrades?

The Prime Minister: I am grateful to the hon. Gentleman for his concern on the latter point. If his idea of negotiations is that they should be a slogging match on television, with grunts, groans, black eyes and so on, that is not my idea of negotiation. The hon. Gentleman had every opportunity for seeing a very succesful exhibition of real, hard athletic struggle when Scotland won their recent match against Wales.

Mr. William Hamilton: Can my right hon. Friend say at this juncture whether all our Commonwealth partners agree with what has so far been achieved? Will he say whether he is satisfied that the Industry Bill which is before the House can be implemented within the terms so far renegotiated? Will he further say what the exact timetable is now? May we be assured that there will be a debate on the Government's recommendation before the legislation on the referendum is introduced, since if the House agrees to that there will be no need for the referendum?

The Prime Minister: Knowing that my hon. Friend, as always, is trying to be utterly helpful in all these matters, I know that he will be glad to know that there has been this morning— I heard on the radio— a warm welcome to the agreement by the Prime Minister of New Zealand. He is rightly reserving the right to study the exact details, particularly so far as the matters to which he attaches importance are concerned— the question of the price adjustments and the periodic reviews of prices.
Concerning the Industry Bill— and here I would also include anxieties about steel and the regions, because these are very much manifesto points— we have been into these matters very thoroughly. I did this, indeed, myself last night, with the President of the Commission, and my right hon. Friend was with me. My hon. Friend will be aware— whether or not it excites him I do not know— that there is nothing in the Community whatsoever to limit the ability of a national Government

to take industries into public ownership. I cannot find any evidence that what is intended, by at any rate a majority in the House, in the Industry Bill would be impeded at all by the Community.
Whether in private or in public industry, there is always the question of international competition and taking unfair advantage, but that is a matter on which we had very strict regulation in EFTA, and we have also strict regulation of the matter in GATT.
Concerning the timetable, I thought I had indicated that we hope to make a statement before Easter on the Government's recommendation to the country when the Cabinet has so decided. I know that my hon. Friend will co-operate to the full in helping to get the Referendum Bill through so that the issue on which the Government fought the election— a free decision by the British people— can take place as quickly as possible.

Mr. Gwynfor Evans: Did the Prime Minister raise in Dublin the question of the representation of Wales and Scotland in the institutions of the EEC?

The Prime Minister: That was not discussed in these discussions.

Mr. Spearing: Does the Prime Minister recall that one of the fundamental objectives of the renegotiation was the retention by Parliament of policy and power over the British economy? Will he tell the House in what particular regard these have now been improved on in the terms negotiated by the right hon Member for Sidcup (Mr. Heath)?

The Prime Minister: There will certainly be opportunity to go into these matters in detail when the Cabinet makes its recommendation. But I would remind my hon. Friend that in that particular section of the manifesto there was reference particularly to the test case and fiscal matters. So far as this is concerned, we have not needed to improve things very much, except, concerning fiscal matters, that I do not believe that the harmonisation of VAT, about which many of us were anxious, is now a real threat to us, Parliament or anyone else.
The other issues were regional, on which we have now got a very significant advance on what was negotiated by the Conservative Party, specifically and in terms.
The third matter was industrial questions. I gave notice many months ago that I was particularly interested in steel here, because the result of the previous Conservative Government's repeal of Section 15 of the Iron and Steel Act is capable of creating a total shambles in the steel industry. That is why my right hon. Friend raised this matter last week, and I gave him full and detailed support yesterday.

Mr. Alexander Fletcher: As for the time being collective responsibility has been suspended as a feature of our system of Government, does the Prime Minister feel free to tell the House whether or not he supports our continued membership of the EEC?

The Prime Minister: So far the Cabinet has not taken a decision. Therefore, there is nothing on this question. It is the usual thing for the Cabinet to decide these things and then to inform the House. It is true that there is very serious concern about collective responsibility, and the Conservative Party is now throwing over everything it did when in office, and no one at the time had the guts to dissociate himself from the policy the Conservatives now condemn.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: These are obviously matters for debate.

Following are the statements :

A. C.S.C.E.

The Heads of Government reaffirmed the determination of the Nine to pursue and develop their policy of detente and cooperation in Europe.

They expressed the hope that this policy will encourage ever-increasing understanding and trust among peoples, which is the basis for a genuine improvement of the political climate on the continent. This objective will find particular expression in the development of relations between states and peoples in which an important part should be played by the individual.

In this context, the Conference on Security and Co-Operation in Europe, and the implementation of its decisions, are destined to play an important part.

The Heads of Government expressed their satisfaction with the constructive rôle which, due to their concerted diplomacy and the common positions they have adopted, the Nine have been able to play in the course of this conference, which is closely related to the interests of the European Community.

The Heads of Government reviewed the development of the work which is currently under way in Geneva: they noted that substantial progress had already been made, but also that some important points remained to be settled.

They pronounced themselves in favour of as rapid a conclusion as possible to this work. To this end, they intend to continue and intensify their efforts to seek, in an open and constructive spirit, positive solutions to the problems which are still under discussion or outstanding.

The Heads of Government hope that all participating states will as they have decided to do themselves, make every effort necessary to obtain balanced and satisfactory results on all the subjects on the agenda. This would make it possible to envisage the conclusion of the conference at an early date and at the highest level.

B. Energy

The Heads of Government, meeting in Council in Dublin, examined the problems connected with the International Energy Conference. They agreed that the Community should undertake intensive preparation for this conference without delay. Preparation will involve listing the various problems, concerning both matters specifically relating to energy and directly connected questions concerning economics, finance and the developing countries. to be dealt with at the conference and the preparatory meeting for it. Preparatory work will also attempt to define the joint responses to be made depending on the positions adopted by the other participants at the conference.

The preparatory work will be carried out under the authority of the Council (Foreign Affairs) by a high-level ad hoc committee composed of representatives of the member States and the Commission. It will be based on the inventory, to be drawn up by the Commission, of problems to be dealt with at the conference and the preparatory meeting, any proposals which the Commission submits to the Council on these problems and suggestions and requests made by the member States.

The Council will take the appropriate decisions on this basis and in particular will determine the content of and arrangements for the dialogue to be conducted with the other consumer and producer countries.

The Council has agreed to meet at the level of Heads of Government in good time to prepare for the conference.

C. Cyprus

The Heads of Government and Foreign Ministers, recalling the statement issued by the Foreign Ministers following their meeting in Dublin on 13th February, hope that in the context of the discussions currently being held at the United Nations in New York, there will be an early resumption of negotiations on the question of Cyprus. The Nine will of course continue to keep in close touch with developments as regards the situation in Cyprus.

D. New Zealand dairy product imports

The Heads of Government, meeting in Council at Dublin the 10th March, underline the importance which they attach to Protocol 18 of the Act of Accession, as regards the relations of the Community with New Zealand, a traditional supplier of dairy products to a substantial part of the enlarged Community.

They invite the Commission to present a report in order to prepare the review provided for in Article 5 of the Protocol and to submit as soon as practicable a proposal for the maintenance after 31st December 1977 of special import arrangements as referred to in that Article. They observe that the institutions of the Community have already carried out certain price adjustments in the framework of the Protocol. In the same spirit, the Community, which remains attached to a fair implementation of the Protocol is ready to review periodically and as necessary to adjust the prices having regard to the supply and demand developments in the major producing and consuming countries of the world, and also to the level and evolution of prices in the Community— including intervention prices — and in New Zealand, taking moreover into account cost developments in New Zealand and trends in freight charges.

As regards the annual quantities to be established by the Community institutions in the framework of the special arrangements after 1977. these should not deprive New Zealand of outlets which are essential for it. Thus for the period up to 1980, these annual quantities depending upon future market developments, could remain close to effective deliveries under Protocol 18 in 1974 and the quantities currently envisaged by New Zealand for 1975.

They note that Protocol 18 provides that the exceptional arrangements for the import of cheese cannot be maintained after 31st December 1977. and that this situation and the problems which may arise from it will be given due attention with appropriate urgency, taking into account also the considerations in the following paragraphs.

The Heads of Government note, moreover, that New Zealand and the Community together provide the major part of world exports of dairy products. They, therefore, express the wish that, in the same spirit with which the Community approaches the application of Protocol 18, an ever closer co-operation be developed between the institutions of the Community and the New Zealand authorities with the objective of promoting in their mutual interest an orderly operation of world markets. Such a co-operation, apart from its intrinsic value, should provide a basis from which to achieve, in a wider framework, the conclusion of an effective world agreement such as is envisaged in Protocol 18.

E. Budget Correcting Mechanism

The Council agrees on the correcting mechanism outlined by the Commission in its communication entitled "The Unacceptable Situation and the Correcting Mechanism "with the following modifications :


1. The criterion concerning the balance of payments deficit and the two-thirds ceiling are dropped.
2. The following provisions will be incorporated into the agreed mechanism:

A. The amount of the correcting mechanism shall be up to a ceiling of 250 million units of account. However, as soon as the amount of the Community budget exceeds 8,000 million units of account, the ceiling shall be fixed at an amount representing 3 per cent. of total budget expenditure. 
B. When a moving average drawn up over 3 years indicates that the balance of payment on current account of the country in question is in surplus the correction shall only affect any difference between the amount of its VAT payments and the figure which would result from its relative share in the Community GNP.

POST OFFICE GIRO

The Secretary of State for Industry (Mr. Anthony Wedgwood Benn): With permission, Mr. Speaker, I should like to make a statement about the Post Office Giro.
When my right hon. Friend the Paymaster-General announced on 31st July last that the trustee savings banks were to be empowered to develop comprehensive personal banking services along the lines recommended by the Page Committee, he also referred to the importance which the Government attach to the growth of the National Giro and said that we were ready in principle to see a comparable extension in Giro's banking facilities.
I can now inform the House that, after considering proposals put forward by the Post Office at my invitation, the Government have agreed to a number of measures which are designed to set Giro on a surer foundation by enabling it to provide a more complete banking service for its personal and corporate customers, by seeing that there is fair competition for Government business, and by restructuring its capital to accord with its needs.
Giro will therefore be authorised to offer facilities for personal loans and overdrafts, overdrafts for business customers, local authorities and nationalised industries, and certain other related services. These new facilities will be introduced on a phased basis. Their precise timing and scope will be decided by the Post Office in consultation with the Government and


will be subject to the normal controls exercised by the monetary authorities.
The Government are also taking steps to ensure that there is fair treatment for Goverment money transfer business as between Giro and the services offered by the Paymaster-General's Office and the banks. Departments should use the service which meets their needs most efficiently and economically, but in making their choice they must take account of all available facilities and their associated costs and assess competing bids on a footing of full equality.
The Government have further agreed to provide Giro with a capital structure better suited to its present and future needs and earning capacity. They will accordingly seek powers to effect a capital reconstruction involving a partial write-off of the debt incurred by the Post Office to finance past Giro deficits and the conversion of part of the remaining Giro debt into public dividend capital, a form of equity that will give the service greater flexibility and align its capital more closely with that of its competitors in the private sector. The Government will require an adequate return on this investment and will at the appropriate time agree with the Post Office a new financial objective for Giro. It is intended that the necessary legislation will be brought forward early in the next Session, preceded by a White Paper setting out the agreed plans for Giro's future in more detail.

Mr. Heseltine: Ten years ago the right hon. Member told the House that his calculations for Giro indicated an 8 per cent. return in the long run with as few as 1¼ million accounts and an average balance of £100 to £150. He went on to describe these figures as very cautious. I am sure that the whole House will understand that this afternoon he has at least maintained intact his reputation for crass financial misjudgment. In today's statement we have had no forecasts, no quantifications of capital write-off and an unlimited extension of services for which no known demand exists. All that we do know is that last year—

Mr. Speaker: Order. It is not in accordance with the custom of the House that a statement should be followed by a counter-statement. The hon. Gentleman must ask questions.

Mr. Heseltine: Is the right hon. Gentleman aware that all we do know is that the losses on Giro in the current year total £4 million and that the estimated loss next year is a further £4 million? Is this really the time to inject further competition into the openings which have recently been made available to the trustee savings banks and other joint stock banks which already have great pressure on them? Can the Secretary of State tell us, first, what is the amount of the capital write-off? Secondly, will the adequate return to which the statement refers be expected to be comparable with that earned by the joint stock banks? Third, where does he see evidence within the activities of the Post Office that sufficient expertise exists to monitor overdrafts and personal loans to people and companies?

Mr. Benn: I shall try to answer some of the points raised by the hon. Gentleman. He will have noticed that I said that a White Paper will be published. Perhaps he could await that before he rushes to his conclusions. During the period from 1968 the Giro has lost £28 million on which £6 million in interest payments is required. In my judgment this is mainly due to the attempt by the Conservative Party to kill it off, which did enormous damage to it. If the interest payments are lifted by a reconstruction, the Post Office believes that viability will be possible relatively soon.
We believe that there is a case for Giro. It was introduced much later than it should have been because of the opposition of the Government pre-1964, although it was strongly urged by the then Postmaster-General as I understand it. It has been in operation successfully for many years in European countries. If it had not been for the strong advocacy of Giro by the Post Office unions and Mr. Paul Thompson and others the Giro might never have come to this country. In our judgment, to provide a service through 21,000 post offices six days a week is a valuable public function which we wish to maintain and develop.

Mr. Mahon: Is my right hon. Friend aware that his statement will be welcome to those of us who have been faithful supporters of Giro? Will he discount the Jeremiahs on the Tory benches who since the beginning of Giro have done irreparable harm to it? May I ask, on behalf


of my constituents and the people of Merseyside who need Giro in many ways, whether my right hon. Friend can tell us whether this good news will bring any further employment to the region?

Mr. Benn: I cannot answer the latter point without notice. It will be open to the Giro to proceed immediately with the developments I have described, but the legislative provisions will be for the capital reconstruction. To that extent the Giro will be able to move into this new phase of development. I strongly support what my hon. Friend says about the role of Giro both for customers and for that part of the country in which its headquarters are situated.

Mr. Richard Wainwright: Without intending to prejudice this extension of the Giro service, may I ask the right hon. Gentleman about the procedure he has announced? Why have the Government agreed already to the Post Office undertaking a fundamental extension of authorised services before they have come to the House with the proposed legislative provision for altering the capital structure?

Mr. Benn: The hon. Gentleman will know enough about the Government to know that a departmental Minister making such a statement would not do so without advice about the legal and statutory position. I am advised that, subject to the approval of the Treasury—which controls everything— the Post Office may designate facilities—I am talking now about loans and overdrafts— as appropriate assets for the purpose of Schedule 2 of the Post Office Act 1969 for which there is statutory backing. It will be for the House to consider in due course and reach a judgment as to the legislation that will be needed to provide for the capital reconstruction.

Mr. Geoffrey Finsberg: May I declare my interest as an unpaid director of the London and South-Eastern Trustee Savings Bank and ask the Secretary of State whether he will bear in mind that it might he somewhat unfair to the nonprofit-making trustee savings banks if he were to give these powers to G;ro before the trustee savings banks were enabled to carry out these functions?

Mr. Benn: I am advised that the legislation for the Giro and tin trustee

savings banks would be produced at the same time. I assure the hon. Gentleman that in harnessing the Giro expansion to the trustee savings banks expansion it was intended that there should be no undue advantage given against the trustee savings banks, although that is a matter directly for the Treasury.

Mr. Wrigglesworth: Can my right hon. Friend say how the losses of Giro have decreased and its business has grown over the past two years? Can he say whether the changes he is proposing will completely remove the unfair disadvantage under which Giro has laboured since its inception?

Mr. Benn: My hon. Friend will obviously want to await the White Paper for fuller details. It is true that the losses have been diminishing, as one would expect with a developing service. It is also true that the Giro has been at a grave disadvantage vis-à-vis the commercial banks and the Paymaster-General's Department in the handling of Government business. I would certainly aim to see that the proposals for fair treatment, or what is sometimes rather curiously called fair competition, between the Giro and the Paymaster-General are not to the disadvantage of Giro.

Sir J. Eden: Is the right hon. Gentleman saying that he cannot now give the House the factual financial information which it should have if it is to make a proper judgment of the quality of his statement? For example, can he confirm that it is still the Government's intention that Giro should break even by 1977? What prospects does he see of this being achieved as a result of the proposals he has brought to the House?

Mr. Benn: The right hon. Gentleman will appreciate that I cannot answer all the questions put to me after making a statement. I will furnish the right hon. Gentleman with all the information available to me, subject to the fact that he would need to await the White Paper because the capital reconstruction we have in mind affects the date on which the Giro would be able to meet the new financial objectives set for it. The first financial objective, set when the right hon. Gentleman was at the Post Office, has been met on time. The Giro is now moving towards meeting the second five-year target.

NORTHERN IRELAND

4.8 p.m.

The Secretary of State for Northern Ireland (Mr. Merlyn Rees): I will, with permission, make a statement.
Since the cease-fire resumed on 10th February, there have been no major incidents between the security forces and the Provisional IRA. The Government incident centres set up to communicate about possible misunderstandings which might threaten the cease-fire have been of practical value.
A beginning has been made in changing the rôle of the Army. For example, there has been a considerable reduction in the size and frequency of Army patrols and in the scale of searching and questioning. Some road blocks and some road humps have been removed.
The House will know that, despite the Provisional cease-fire, violence has not ceased. There have been feuds between various groups such as the Irish Republican Socialist Party and the Official IRA. There have been inter- and intra-sectarian killings and woundings. The number of deaths since 10th February has beeen 14, and 124 people have been injured. None had been a member of the security forces. In the same period, 16 people have been charged with murder and attempted murder, and another 53 charged with other serious security-type offences.
With regard to detention, the House should know that I have signed no interim custody orders since the cease-fire resumed On 24th February, I announced a programme for the release of a further 80 detainees over the coming weeks. Forty have so far been released. Depending on the security situation, I hope to complete this programme by Easter. At the moment, a total of 122 detainees have been released since the original ceasefire on 22nd December 1974. If all goes well, the total should reach about 160 by Easter. After that I intend that a further release programme should follow, but again related to a genuine and sustained cessation of violence.
I am convinced that now is the time to look at some of the wider implications of the problems that six years of violence have created in Northern Ireland. These

problem are a tangled skein I want to make a start on unravelling them. The cease-fire has high-lighted the need for action.
I am especially concerned about young adult offenders, and I believe this view is widely shared throughout the community in Northern Ireland. I have asked Lord Donaldson, one of my Under-Secretaries of State, to take charge of a special inquiry into the problem of young offenders and to report to me as a matter of urgency. He will look at the question of accommodation, including the extent to which it may be possible to use the new and improved prison accommodation which will start to become available later this year for young adult offenders. He will also look at educational facilities and vocational training and examine the question whether a special parole or licensing scheme should be introduced for young offenders.
In the same spirit, I hope soon to bring the House a parole scheme for convicted prisoners along the lines of that which already operates in Great Britain. With regard to the particular question of special category prisoners, the House will wish to discuss this matter further in the context of considering the Gardiner Report.
Policing is vital to the future of Northern Ireland. There can only be one police service. The Government want to achieve a situation where the RUC, accepted and sustained by a law-abiding community, becomes the major organisation for law and order. This is not a role for the Army.
This is not going to be achieved overnight. It does not involve trying to flood the difficult areas with policemen. The plain fact is that the Army will have to carry out some ordinary policing functions in some places for some time to come.
With regard to the control of the police, there is a delicate balance of functions to be achieved between Government— the Home Secretary and Secretary of State for Scotland in Great Britain and myself in Northern Ireland— and local government in the shape of a police authority and the chief constable, who is operationally autonomous. The achievement and maintenance of this relationship is of fundamental importance to the liberty of the citizen.
On this basis it may be that the Constitutional Convention will have ideas to contribute to this very difficult question of policing. But it must be made clear, as with the work of the convention as a whole, that a final decision on this will be for this House to make.
There is, too, the question of complaints against the police. Let me say that I believe the existing complaints procedure is being carried out well, but I intend in due course, as is intended in Great Britain, to add in Northern Ireland an independent element into the procedure.
As I said in the House on 14th January, the Government seek a lasting peace, and I also said that a permanent cessation of violence would enable the Army to make a planned, orderly and progressive reduction in its present commitments. This is still my aim. If the security situation permits, further reductions will be made in Army force levels.
I also want to see further relaxations in security so that people can move about more easily. Again, if the situation permits, I would like to bring to an end the searching of pedestrians entering the city centres in Londonderry and Belfast and, before taking such a decision, I would, of course, take into account the views of the people and the traders there.
It is not possible to see the future clearly, but it is my strong personal view that it is wrong to look at the many problems in Northern Ireland as if there were some ready-made textbook solution. What the Government will do is to respond positively to a developing situation. This statement is made on that basis. It is the hope of the Government that those elected to the Constitutional Convention will respond in a similarly positive manner, taking fully into account the views of all the people in Northern Ireland.

Mr. Neave: Is the right hon. Gentleman aware that, while there may be no textbook solutions to the problem in Northern Ireland, his statement on policing is by far the most important part of what he has just said? We agree with him that policing is vital to the future of Northern Ireland. Can he say what steps he proposes to take to secure support for the RUC, which we congratulate on its fine, record, from the more responsible

leaders? Does he agree that this is not a matter of political bargaining? Does the right hon. Gentleman agree that a more public role for the police authority would be helpful to emphasise that it is being administered by an independent body? What progress has been made in setting up police liaison committees?

Mr. Rees: May I first welcome the hon. Gentleman to his Shadow post?
Policing is one of the most important issues in Northern Ireland— some people regard it as the major problem— and there is no doubt that over the past five years the Army has taken the lead in well nigh everything. It is our job to get the position reversed so that the police take the lead.
I do not believe that I can do anything to get support from leaders for the police. It is something that emerges and evolves. It is interesting that in the cease fire the subject of the police and support for the police as a whole becomes a subject of discussion, and I hope that in the convention we shall see it come to fruition.
The police authority is a subtle subject. There are those in Northern Ireland who believe that the police authority runs the police. People in this country know that that is not the case, but it is important to get the relationship right. I do not believe that we have got it right with regard to the police authority, but I have no immediate plans for dealing with that.
If anybody in Northern Ireland has any ideas about liaison committees, I know that the chief constable will be prepared to listen to what he has to say.

Mr. Molyneaux: Is the right hon. Gentleman aware that we appreciate his coming to the House today against medical advice?
May we assure him that there will be widespread support for his clear reiteration of the concept of the RUC as the only police force in the Province? Does he agree that this reassurance is essential if the RUC is to be in a position to assume the functions presently performed by the Army?
Finally, is the right hon. Gentleman aware that there will be support for his intention to tackle urgently the grave problem of young adult offenders?

Mr. Rees: With regard to the last point about young adult offenders, I am glad that the hon. Gentleman, with his knowledge of Northern Ireland, has raised the matter. The degree to which young people are involved in violence is quite incredible, and the problem will remain with us for generations to come. It is not just a matter of education. This is why I have asked my noble Friend the Under-Secretary of State in the other place to look into the matter. I believe that we have too many young people in prison. We must deal with the problem as quickly as possible because they are attending the university of violence where they learn how to carry on in the future.
I do not want to repeat what I said in my statement about the police. I want to make it clear that the problem of the past five years, whatever its origins, did not just happen. Policing was part of it, and if we all think carefully and use our heads to secure the acceptability of the police over the months and years ahead we shall achieve what is necessary— acceptability by the community as a whole.

Mr. Dalyell: What progress is being made in dealing with the admittedly difficult matter of the aftercare of young detainees when they are released from Long Kesh?

Mr. Rees: This is a much more difficult question than it might seem on the surface. My right hon. Friend the Minister of State played a part in the setting up of a voluntary organisation last year, and one of the things we find is that many people who have been detained wish to have nothing to do with any organisation which is even remotely connected with the Government. It is a difficult issue. I am advised, however, by people in Northern Ireland who know a great deal about the matter that the important point is to get young people who have got themselves caught up in violence away from prisons and such places. After that, I believe that the education system and the very strong family ties in Northern Ireland, in both communities, will play a major part in rehabilitation.

Mr. Thorpe: Is the right hon. Gentleman aware that we all recognise that the cease-fire is a very fragile plant? In so far as he has told the House of imagina-

tive measures to maintain that cease-fire and to improve the political climate, he will receive, and he should receive, the support of the whole House.

Mr. Rees: I am very grateful to the right hon. Gentleman. After one year in this job I am well aware, as are other right hon. and hon. Gentlemen, that, despite disagreements, we all get by as a result of a general acceptance of the problem and by the good will of everybody in the House who has views on the matters.

Rev. Ian Paisley: Is the right hon. Gentleman aware that the official IRA has declared an amnesty to come in on a deadline later this week for members of the Irish Republican Socialist Party? Is he aware, too, that a very serious situation is arising in areas where these two forces are shooting it out? Can he take any effective steps to stop this?
Can the right hon. Gentleman indicate to the House when we shall have a debate on the Gardiner Report, as in this context it is a very important report, as I am sure he is aware?
Will the system of parole which the Secretary of State has announced in relation to convicted prisoners apply also in relation to special category prisoners?

Mr. Rees: I made it clear earlier that the parole scheme which we shall bring before the House is for convicted prisoners. We need to look at the scheme that is working in this country. It needs probation officers and prison officers who can make evaluations of those concerned. As I understand it, this would not be possible with special category prisoners. I have decided to move ahead on convicted prisoners per se to get the scheme working.
I am looking very carefully with my advisers at the question of the Gardiner Report and all that goes with it. The question of a debate is for my right hon. Friend the Leader of the House. However, I believe that it would be valuable to have a debate before I reach conclusions on this important report.
It is very difficult to deal with internecine shootings and killings, whether they are between communities or within communities. The police are doing all they can, but the police have a very difficult job when people who one would


imagine are on the same side start shooting each other.

Mr. McNamara: Is my right hon. Friend aware that many people will welcome the muted optimism contained in his statement realising, as we do, how fragile the peace still is? There are positive elements within the statement.
Will my right hon. Friend inform the House, first, of the number of detainees still in prison and, secondly, what steps he intends to take to try to ensure that sufficient probation officers will be available in a very heavily over-worked and under-valued department in Northern Ireland to ensure that the younger offenders can be properly dealt with? This problem started with youngsters of seven or eight filling petrol bombs in 1969.

Mr. Rees: I am grateful to my hon. Friend. I hope that we can always justify his description of muted optimism, which is the right approach. There are about 450 people detained. From the figure of 122 released since Christmas, my hon. Friend will see the relative speed with which releases are taking place.
On the question of young people, the whole matter of probation officers is being carefully considered. It would be a mistake to regard the social services in Northern Ireland as a pale imitation of those on this side of the water. They are very good and have some fine people operating in them. I am sure that they will be able to cope with this.

Mr. McNamara: They are overworked.

Mr. Rees: Yes. The matter of their overwork is being considered. I pay tribute to them.

Mr. Powell: May I offer the right hon. Gentleman such corroboration as I may of the impression of a continued fall in tension which is implied by his statement and the hope that this will gain a momentum of its own? As the right hon. Gentleman will no doubt wish to make a statement on this subject to the House, may I ask him what he has to say about the serious incident which occurred a day or two ago in Newry

relating to the escape of prisoners which is not unrelated to the level and effectiveness of policing?

Mr. Rees: I am grateful for the right hon. Gentleman's first remark about the general feeling in Northern Ireland which is certainly one with which I and all those to whom I have talked in Northern Ireland agree. Let us hope that matters continue in this way.
I am having an investigation made into the recent escape at Newry. The less I say about it at present the better. It was a bad thing to have happened. Twelve people who had been properly sentenced on matters concerning an escape then escaped again. As there is an inquiry into the matter at Newry Court House, I would rather say simply that I am having an inquiry made.

Mr. Russell Kerr: Is the Minister aware that there will be a warm welcome in all parts of the House for the statement he has made today, and particularly for the cool-headed and imaginative way in which he and his colleagues in office are discharging their awesome responsibilities?
May I go further and urge my right hon. Friend, however, not to let anybody persuade him to slacken the pace of the release of internees, because in the opinion of a number of us who are considerably experienced in this very puzzling subject this is the one key thing which will expedite the arrival of peace?

Mr. Rees: I see our policy in this regard very much as a matter of dealing with things on a day-to-day basis as the situation unfolds. I am not unaware of the great effect that detention has in the community. However, I must bear in mind also that I originally signed the piece of paper which put people inside because of evidence given to me of their involvement in violence. I have a responsibility to the security forces in their very difficult task. I must balance one consideration against the other.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. We must get on. Any further questions can be tabled in the normal way.

HOUSE OF COMMONS (TIMING OF DIVISIONS)

Mr. Speaker: I have a statement to make about the timing of Divisions.
It has been represented to me that some hon. Members who have desks in the Norman Shaw North building and other outbuildings have recently found some difficulty, when a Division has been announced, in getting to the Lobby before the doors have been locked.
Standing Order No. 34, which governs this matter, lays down that a period of at least six minutes must be allowed to elapse between the original direction by the Chair to "Clear the Lobby "and the later direction to "Lock the doors ". Six minutes has, in fact, long been the standard time allowed.
I propose now, for an experimental period, to extend this period of six minutes to eight minutes. I should point out that the extra two minutes so allowed will be added to the time elapsing between the announcement of the Tellers and the direction to "Lock the doors ". There will be no change in the interval between the original direction to "Clear the Lobby" and the appointment of Tellers, which is fixed at two minutes by the Standing Order, and in which matter I have no discretion. There should, therefore, be no delay in the beginning of the count by the Tellers : and, provided that all Members, from wherever they have to start, still continue to come to the Lobby as quickly as possible when the Division bells ring there is no reason why the time taken by a Division should be increased.

QUESTION OF PRIVILEGE

Mr. Speaker: I now have to rule upon the complaint of breach of privilege raised yesterday by the hon. Member for Staffordshire, South-West (Mr. Cormack)—
 namely, the action of certain public servants and those inciting them to frustrate the work of Parliament."— [Official Report, 11th March 1975 ; Vol. 888, c. 284.]
I wish to make as clear as I can to the House my function, as I see it, in a matter such as this.
My duty is to decide whether in my judgment the facts alleged fall sufficiently clearly within an area in which a breach

of privilege or a contempt of the House has been found by the House on a previous occasion to have been committed, or whether they fall sufficiently clearly within an area in which a possible breach of privilege or contempt should be considered, so that I should allow a motion relating to the complaint to have precedence.
As the House knows, I dislike the term "prima facie case ", because I think that that implies a judgment on the merits of the case.
If I decide in the negative, that is not necessarily the end of the matter. The House could come to a decision on the point on a motion moved subsequently after notice.
In the present instance I know of no precedent for the House having reached a decision upon, or indeed even having formally considered, a similar case.
There has also been of recent years a reluctance to extend the limits of contempt.
Accordingly, although important issues are involved affecting the efficiency and convenience of the House, which need careful consideration at some stage, and perhaps not only by the House, I have come to the conclusion that I should not allow a motion relating to the hon. Member's complaint to have precedence over the Orders of the Day.

HOUSES OF PARLIAMENT (FACILITIES)

Mr. Cormack: Naturally, Mr. Speaker, I accept your ruling on the question of privilege for which I thank you. I am sure the whole House is grateful to you. In the light of that ruling and your subsequent suggestion that the matter should be pursued by other means, I should like to move the Adjournment of the House under Standing Order No. 9. Should I do that now or later?

Mr. Speaker: I am afraid that that is a proposition up with which I cannot put. A ruling on privilege according to the usual practice comes last in the order of business taken after Questions immediately preceding the Orders of the Day. An application under Standing Order No. 9 would have had to be made beforehand and cannot arise out of a privilege


matter. The hon. Gentleman cannot move that motion now.

Mr. Peyton: The House will be grateful to you for your statement, Mr. Speaker. In particular we take note of what you have said about the importance of having regard to the convenience of the House— something which may need to be considered not only here but by others. I am sure you will be aware that it is a very serious matter that deliveries of mail to this place are being interrupted. [HON MEMBERS : "Hear, hear."] It has often been said, and rightly so, that the privileges of Parliament exist to help Parliament sustain the liberties of the individual outside Parliament, and I do not think we should ignore that at this time. While accepting everything you have said, Mr. Speaker, I hope that we may possibly come back to this issue at a later stage if this unfortunate occurrence continues.

Mr. Speaker: I hope very much that the House will do that. I do not think I can permit a debate on a ruling of mine on a question of privilege.

Mr. Hugh Fraser: On a point of order, Mr. Speaker. The House is in a very serious position as regards our constituents' mail. Surely this ought to be debated now. It is a question not of the privilege of this House but of the privilege of our constituents and their ability to get in touch with their Members of Parliament. I suggest that this matter should be debated forthwith.

Mr. Speaker: No. I have sought the support of hon. Members on both sides of the House in this matter of order. I have made my ruling and I have made a suggestion. No further matter for the Chair can possibly arise now. If the matter is to be pursued it must be pursued with the Leader of the House tomorrow or in other ways. [HON. MEMBERS : "Now."] I have given a ruling on privilege.

Mr. Thorpe: On a different point of order, Mr. Speaker, without any reference to your ruling which, of course, we accept. May I ask the Leader of the House, through you, whether we may have a statement tomorrow? [HON. MEMBERS : "Today.]"' It is not possible to gel copies of Hansard. By one

o'clock today all 300 copies which are normally delivered to the Stationery Office were sold out and it is not possible for Members of Parliament to get a daily report of the proceedings in Parliament. There are very difficult matters involved. Therefore, I hope the Leader of the House will make a statement now or tomorrow.

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I certainly agree to make a statement tomorrow. I promised the House yesterday that when I had anything to report I would do so. There are copies of Hansard in the Library for reference. I agree that there are inconveniences to hon. Members, but it does not help to exaggerate them, as one hon. Member opposite did on the radio today. That does not help to get a solution to the problem. We are trying to solve the problem. We are providing the necessary papers for debates. The services of the House are continuing. I hope hon. Members will be patient. I will certainly make a statement tomorrow.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. I cannot allow an irregular debate on these matters. have given my ruling. The Leader of the House has said that he will make a statement tomorrow. I am not prepared to have my position challenged in this matter, and I will not allow points of order which have nothing to do with the Chair. These are matters concerning the authorities of the House and they must be pursued in other ways.

Mr. Ronald Bell: On a point of order—

Mr. Speaker: Is it a different point of order?

Mr. Bell: Yes, Mr. Speaker. I believe that it is your responsibility to supervise the printing of the Vote. Hansard, I am sure, is important but is it not for you to see that the Order Paper exists in a material form? At the moment no hon. Member can put down about anything a motion which will appear on any piece of paper. There is today no Order Paper. There is a list of Questions. There are matters for consideration, but


the general Order paper does not exist. Under the sesssionsl Resolution that is your responsibility, if I may say so. May I ask you to protect the rights of the Houses in this matter, Sir?

Mr. Arthur Lewis: Before you reply to that point of order, Mr. Speaker, may I remind you that this occurrence is not of recent origin. It happened on numerous occasions when the Tory Government were in office, and sometimes for weeks on end. You and your staff have been very kind and helpful to us in the past. At the moment there are Questions on the Order Paper. But never once during the period of Tory Government did I hear a complaint, when all the good motions which I put down were not printed. I am sure that we all pay a tribute to you and your staff for what you have done, and I suggest that we should now wait to hear what the Leader of the House says tomorrow.

Mr. Speaker: I do not understand this. I believe that it is my responsibility to appoint the printer, but how much further I can go I do not know. On a question of fact, there is an Order Paper. I have one before me. I have made it my business, with the very valuable assistance of certain other people, to do the best we can to produce an Order Paper for hon. Members.
I do not think the Chair can allow an irregular debate of this sort. If the House wants to have a debate, it must seek other means of doing so.

BILLS PRESENTED

SEX DISCRIMINATION BILL

Mr. Secretary Jenkins, supported by Mr. Secretary Foot, Mrs. Secretary Williams, Mr. Secretary Prentice, Mr. Secretary Ross, Mr. Attorney-General and Dr. Shirley Summerskill, presented a Bill to render unlawful certain kinds of sex discrimination and discrimination on the ground of marriage, and establish a commission with the function of working towards the elimination of such discrimination and promoting equality of opportunity between men and women generally ; and for related purposes: And the same was read the First time ; and ordered to be read a Second time tomorrow and to be printed. [Bill 106.]

COMMUNITY LAND BILL

Mr. Secretary Crosland, supported by Mr. Secretary Ross, Mr. Secretary John Morris, Mr. John Silkin, Mr. Edmund Dell and Mr. Gordon Oakes, presented a Bill to enable local authorities and certain other authorities to acquire, manage and deal with land suitable for development, and to make other provision for and in connection with the public ownership of land ; to amend planning law and the rules for assessing the value of land for compulsory acquisition and other cases where compensation is payable ; to make provision concerning unoccupied office premises ; and to establish a Land Authority for Wales : And the same was read the First time ; and ordered to be read a Second time tomorrow and to be printed. [Bill 108.]

ELECTRICITY DISCONNECTION (AMENDMENT)

4.36 p.m.

Mr. J. W. Rooker: I beg to move,
That leave be given to bring in a Bill to amend the Electric Lighting Act 1882.
I seek the leave of the House to introduce a short Bill to amend Section 21 of the Electric Lighting Act 1882. Section 21 of that Act is still the statutory authority for area electricity boards to disconnect for bad debt. The section gives area boards an absolute right, and they are not required to consult any agency or take account of any circumstances.
It is known that many area boards have arrangements for liaison with local offices of the Department of Health and Social Security or local authority social service departments where they think these departments may have an interest. However, in 1974 this liaison did not stop a total number of disconnections in England and Wales of around 160,000 and in Scotland 30,000 plus. This is a rate of 4,000 disconnections a week. It is interesting to note that these figures represent a total of about 1 per cent. of consumers in England and Wales but 2 per cent. of consumers in Scotland. The Electricity Council informs me, via Parliamentary Answers, that 90 per cent. of the disconnections are reconnected within a week, and many within a few days.
This raises the question : why the disconnections in the first place? There are examples of disconnections lasting for weeks, ranging to months, ranging to over two years. From evidence collected by a local group of the British Association of Settlements, by contact with the area boards, there is a fairly reliable estimate that at any one time— tonight, for instance—40,000 families are without electricity for lighting, heating or cooking, or all three.
In 1882 when the Act was put on the statute book the number of private homes with a supply of electricity, other than a private generating plant, was measured in scores, not hundreds. It was not until the turn of the century that large schemes of elecricity supply got under way. The Royal Commission's Report of 1884–85 on "Housing of the Working Class "

made no mention whatsover of electricity supply. In short, the 1882 Act was placed on the statute book well before the supply of electricity and dependence on it was the norm.
I do not think it would be disputed today that a supply of electricity to the point of preventing danger and genuine hardship is essential. If the House is contemplating fresh legislation, such safeguards would certainly be included in the Bill. The insertion of such a safeguard or long-stop is the prime reason for the Bill. It will amend Section 21 so that the area boards will be required to seek the prior approval of one or other social agency dealing with family welfare before any action is taken.
There are devices on the market which can be inserted in the fuse-box of any normal home which will give a limited supply of electricity for essential purposes. It would be possible for one of the agencies to direct the insertion of one of these devices pending a longer-term solution to the family's problems. In some cases the Department of Health and Social Security pays the debt or, in many cases, arranges for the debt to be paid, and I do not seek to change that. My Bill will simply ensure that such arrangements are made in all cases before disconnection and not after.
Birmingham Corporation has a scheme for its 20,000 pensioner tenants under which they pay a fixed weekly sum with the rent for heating and lighting. This removes the worry of immense quarterly bills. The amount varies with the size of the home, the area, and the people living in the home. The system has been extended to all pensioners in the city. I am raising this matter today and I want a change in the legislation because this problem does not only affect pensioners where it can be argued that the normal agencies have an interest anyway. Certain examples show what I mean.
The first example is of a man aged 73 living in an all-electric tower block flat in Liverpool with a supplementary benefit of £10·.40 a month and his rent paid direct to the corporation. In July last year he received an electricity bill for £42 which he could not afford to pay. He was refused help by the Department of Health and Social Security, but at the request of the social services department


the area board— the Merseyside and North Wales Electricity Board— did not disconnect. In October he received a further bill for £90 and was disconnected four weeks after receipt of the bill. The social services department agreed to pay the bill and asked him to pay £2 a week voluntary savings, in which case it would pay all his future bills. He was happy, and he was reconnected after two weeks. However, the DHSS had not paid all the arrears, and in February he received a bill for £55. Having paid about 13 weeks of his £2 voluntary savings, he assumed that his electricity bills would be taken care of. He went to the social services department to sort the matter out, and while he was away from home the area board disconnected his supply from outside the property, putting a note through his letter box to say that he owned £91. His supply was disconnected for a week. After a series of telephone calls to those concerned the matter was eventually sorted out.
The second example concerns a Mr. and Mrs. D who have three small children. Mr. D works as a driver and has an income just above the family income supplement level. The man had a debt of £20·06 and his supply was disconnected for two months before the matter was sorted out.
The third example is of a Mrs. Y, who lives in Birmingham and was overcharged £4 by mistake and was told that the matter would be cleared up. While she was away

from home her supply was cut off. The fourth example is of a Mr. and Mrs. M, who live in an all-electric flat. They were disconnected for failing to pay a security deposit of £46. These people would have agreed to a voluntary saving if the matter had been discussed before disconnection. The problems which arose here could easily have been avoided. therefore.
It is to help solve problems like this that I seek leave to introduce this small Bill which I hope will have a big impact on at least 40,000 families who might otherwise be without electricity. I hope, too, that it will do something to mitigate the very high social cost of disconnection which affects 4,000 families a week.

Question put and agreed to.

Bill ordered to be brought in by Mr. J. W. Rooker, Mrs. Maureen Colquhoun, Mrs. Audrey Wise, Miss Jo Richardson, Mrs. Ann Taylor, Mrs. Millie Miller, Mr. Robert Kilroy-Silk, Mr. Ivor Clemitson, Mr. Sydney Tierney, Mr. John Tomlinson and Mr. Geoff Edge.

ELECTRICITY DISCONNECTION (AMENDMENT)

Mr. J. W. Rooker accordingly presented a Bill to amend the Electric Lighting Act 1882 ; and for purposes connected with the matters aforesaid : and the same was read the First time ; and ordered to be read a Second time upon Friday 16th May and to be printed. [Bill 109.]

Orders of the Day — PRICES BILL

As amended (in the Standing Committee), considered.

Clause 1

FOOD SUBSIDIES

4.46 p.m.

Mrs. Sally Oppenheim: I beg to move Amendment No. 1, in page 2. line 6, leave out £1,200' and insert ' £1,000 '.

Mr. Deputy Speaker (Mr. George Thomas): With it we shall also consider Amendment No. 2, page 2, line 21, leave out subsection (3).

Mrs. Oppenheim: Lord Avon, when he was Sir Anthony Eden, once said that everyone is always in favour of general economy and particular expenditure. It is one of the objectives of our amendment to attempt to achieve the former and eventually to provide scope for the latter. In moving the amendment, however, I make it quite clear from the outset that in proposing to reduce the level of expenditure on food subsidies we in no way underestimate the effect of accelerating inflation on those who are most vulnerable in the community or the degree of anxiety and often hardship that this causes.
However, there are a number of other ways in which such people could have been helped more directly, more effectively and less expensively. They are already helped in many ways by the indexation of benefits and pensions. We do not under-rate the extent of public alarm about the present disastrous rates of inflation, but for most people incomes have remained well ahead of prices. I entirely recognise that for those who are responsible for doing the family shopping this may be very difficult to accept, particularly if they have not had the whole of their share of wage increases passed on to them. Even if they have had it passed on they may entertain very justifiable fears about what is likely to happen if inflation continues at the present rate.
Nevertheless, the gap between the increase in average earnings and the increase in the cost of living should be enough to provide now and for the period we shall be discussing sufficient scope to offset the effect of our amendment. Unfortunately there is a group of people in the middle income group who have already suffered a significant erosion in their standard of living and they would be the first to bear the full brunt of our amendment. But these are not the people at whom subsidies were aimed in the first place, and they will not suffer hardship as a result. I would have thought that by cutting back expenditure in general, eventually these will be the first people we shall be able to help by means of a decrease in taxation and in contributions.
I hope that the House will accept that we have carefully considered both the social and the economic implications of our amendments, in which we propose to peg spending on food subsidies at £1,000 million. If spending were to continued over the time scale proposed in the Government's public expenditure survey, food subsidies would cost no less than £3,000 million by 1980 after allowing for a comparatively moderate rate of inflation.
That is a high price to pay for a policy that the Government intended to discard. That is a high price to pay for a policy that many people look upon as nothing more than the political raison d'être for the creation of the Department of Prices and Consumer Protection and as one of the conditions of the social contract. It is a very different sum from the £500 million and the £700 million that were first put to us when the Prices Act was first embarked upon. On that occasion we pressed and pressed to be told how much the subsidies would cost in the end. Apparently the right hon. Lady did not believe that it was relevant to point out that long after the last vestige of any of the relevance that the subsidies may have had in the first place had vanished the country and the people would be paying a very high price for them.
It is fair to say that the right hon. Lady has always made it clear that food subsidies were not to be a permanent feature of the economy. Indeed, the Government, and particularly the right hon.


Lady, have announced their intention of phasing them out and replacing them with alternative appropriate social security benefits. We cannot help but muse as to why, if there are alternative appropriate social security benefits, they were not introduced in place of subsidies in the first place.
The reason for all Governments having eventually to phase out food subsidies is that the cost gets out of control. The Government have accepted that in the case of nationalised industry subsidies. It is just as true in the case of food subsidies.
What lies between the Government and us is no longer the principle but the timetable. I cannot think that even those Labour hon. Members with whom we have often discussed these matters can now believe that the subsidies were a sensible, effective and expedient way of bringing direct help to those hardest hit at a time of severe inflation. I cannot think why the Secretary of State finds it necessary to defend them so passionately and so often when she herself has announced her intention to get rid of them. In many ways the subsidies have been little more than a cruel delusion. They have heightened unreality, disguised inflation and left us late in the day to face disastrous rates of inflation together with a public expenditure crisis. As we read in the Economist this week, public expenditure levels as a percentage of the gross national product are now nearing wartime levels. That must constitute something of a public expenditure crisis.
I do not intend to go into all the arguments that my hon. Friends and I have put to the House so often about the marginal effects of the subsidies. I hope that the House will not think it immodest if I say that the reason why I do not intend to rehearse them is that we have proved indisputably over and over again that the subsidies have been neither economically wise nor socially compassionate. Moreover, we maintain that at such a time as this superficial policies which may have immediate political appeal but over-simplify the questions and distort the answers are positively dangerous. Even in the context of a near-normal economic situation it cannot be claimed that this was ever anything but a wasteful and indiscriminate policy. We have always argued that avail-

able resources could have been concentrated much more effectively on those in need. However, at a time of economic crisis, when the Chancellor of the Exchequer—

Mr. Frank McElhone: As someone who served on the Committee, I have heard the hon. Lady advance her argument before. She says that her party had alternative means, but as far as I know she never described them to the Committee. Further, she has not described them today. What alternatives can the hon. Lady put forward to my right hon. Friend's proposals?

Mrs. Oppenheim: I am sorry that the hon. Gentleman, through no fault of his own, was something of a fleeting visitor in Committee. Probably he did not hear all the arguments that were put forward on a number of occasions and through all the stages of the subsidy legislation. I shall return to that point a little later. I am grateful to the hon. Gentleman for raising it.
At a time of economic crisis even the Chancellor of the Exchequer, whose autumnal euphoria was shattered by the bleak realities of winter, found when the carefully contrived autumnal mists had rolled away that the rate of inflation was not 8·4 per cent. as he claimed, and was not 10 per cent. as he had forecast, but was 26 per cent. He now claims that there is the possibility of national bankruptcy. It is against the background of that statement alone that we believe that the sums proposed in this legislation would be the height of folly in the context of the Government's public expenditure survey. That is particularly so as at least part of the money for the subsidies, as was acknowledged in Committee, must be found from the Budget borrowing requirement.
That means one of two things. First, we can increase our debt and attendant liabilities. Secondly, we can print money. That in itself would be inflationary and would negativate the effects of the food subsidies. In the context of a Budget borrowing requirement of nearly £8,000 million we no longer have the scope for this kind of spending without courting disaster and harming the very people whom we all want to help.
It is tragic that at a time when inflation is declining in most of the major


industrial countries in the world Britain has a rate of inflation which is advancing at a catastrophic rate, so that our capacity to provide help even to those in most need, and even by more sensible means than subsidies, must be limited. Our opportunities for doing so have been preempted by an overriding need for economic stringency as well as by the already crippling state of taxation. That is the price that we are paying for 12 months of Labour Government without any coherent counter-inflation policy ; for 12 months of Labour Government in which public expenditure has been increased in a profligate manner ; for 12 months of Labour Government to use the right hon. Lady's own words— in which they have gambled on the social contract. It is partly because it will be wage costs rather than raw material costs—

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams): I think the hon. Lady has made a misquotation of what I said. I said that the social contract was a gamble on democracy. I went on to say that it was our recognition that people were mature enough to accept voluntary restraint. I should like to straighten out what she quoted.

Mrs. Oppenheim: I am grateful for the right hon. Lady's clarification. It seems that she used the word "gamble "—

Mrs. Williams: Not on the social contract.

Mrs. Oppenheim: There are many people who by now must look upon the Government's action as just such a thing. As I was saying, inflation for the coming year is likely to be triggered more by wage costs than by commodity prices. In fact, commodity prices are likely to decline. They have been declining in the past few months. Food subsidies were a condition of the social contract. They were introduced at least in part to buy off inflationary pay settlements. That is an attempt that has failed.
I regret to tell the House that in Committee we received no undertakings from the Government that they would not use the subsidy money to subsidise excessive pay settlements—

Mr. Ioan Evans: Would the hon. Lady not agree, as her colleagues agreed in Committee, that the threshold

agreements that we inherited from the previous Conservative administration, when wage rates were related to the retail price index, had a bearing on inflation? Does she agree that the Labour Government's intervention by way of food subsidies kept down the level of the price index and had an effect in keeping down wages?

Mrs. Oppenheim: To the limited extent that subsidies kept down the RPI during the period when thresholds were operational, that is true. We often hear the argument from the hon. Gentleman's hon. Friends that present wage rates are the result of thresholds and special cases. That might have been true in the early part of the year, but it was not true in the latter part of the year, when wage rates accelerated a good deal faster.

5.0 p.m.

I do not intend to extend my remarks to deal either with the adequacy of the social contract or with the enigma of its somewhat elastic and elusive criteria. I will leave that argument to those members of the Government who are debating it openly, and perhaps more explosively than I would wish to do, except to say that the conflict within the Cabinet in which certain Cabinet Ministers are expressing their deep, mounting and justifiable fears about what they see as a serious erosion of the social contract and the need for these criteria to be more closely observed is, if anything, the greatest validation for our amendment that we could possibly have.

We have always accepted that food subsidies cannot be phased out overnight. That is one of the difficulties that we pointed out when they were first introduced. Apart from the social consequences, there are difficulties for the trade. Perhaps to some extent the right hon. Lady may have overstated the case in Committee when she said:
 the Opposition, who have close links with the food industry, not least with the food manufacturers, distributors and others, should recognise the problems involved in a sudden withdrawal, or even a sudden halving of the rate, of subsidies. The amendment indicates that they have not seriously thought through the problems entailed if it were accepted."—[Official Report, Standing Committee B, 18th February 1973 ; c. 109.]

I am authorised by the Food and Drink Industries Council to say here in the


House today that it would like to see subsidies phased out.

The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): At what speed?

Mrs. Oppenheim: The Council has authorised me to tell the House that the speed would be over a period of three years. As the hon. Gentleman and the right hon. Lady know, the paper submitted to them by the Federation of Bakers entitled "The State of the Baking Industry "states:
 The industry is now convinced that the subsidy scheme and the price policy underlying it is working in a manner inconsistent with the long-term functioning of the baking industry.
However, we have tried to give the Government maximum flexibility in our amendment, because we entirely recognise that the phasing out of subsidies is a delicate operation. The Bill provides for £1,700 million to be spent, of which approximately £515 million has already been spent and of which the final £500 million cannot be spent before 1st February 1976. We seek to reduce that amount to £1,000 million, which will leave the Government to spend approximately £485 million over whatever period they wish and on whatever they wish. That is approximately £423 million less in constant 1974 money terms than the amount expressed in 1974 money terms in the Government's public expenditure survey over the next two years. However, it represents a saving of £2,000 million in money terms by the end of 1980.
I hope that the House will accept that in producing these figures we are in considerable difficulty. First, we do not have the resources of the Civil Service available to us, and, secondly, we are in the difficulty of translating the sums in the public expenditure survey into money terms, involving as it does the projection of inflation. We have tried to err on the moderate side. We realise that the figures cannot be correct to the last million pounds, but we believe that they are broadly sufficiently correct to reinforce our arguments.
The House will be aware that proposals to curtail food subsidies of this order and in these circumstances are by no means unprecedented. In his 1952 Budget Statement, with what was remark-

able prescience in the context of this amendment, Lord Butler said:
 the very intensity of our economic situation makes it essential to lighten the burden on the economy to bring back…reality."—[Official Report,11th March 1952 ; Vol. 497, c. 1296.]
Lord Butler was proposing to phase out food subsidies in that financial year by what would be at 1975 levels of value £450 million in one year followed by £200 million at 1975 levels in the second year, altogether £650 million— a much sharper curtailment than we propose.
There is one startling coincidence between subsidies at that time and subsidies today, which is that they were worth approximately is 6d per person per week, which, translated into 1975 levels, is 22½ per person per week, identical to the value of present-day food subsidies per person per week.
During the two years in which Lord Butler was phasing out subsidies by this substantial amount, the retail price index fell from a level of increase of 9 per cent. in the previous year to 3·1 per cent. in the first year of the phasing out and 1·9 per cent. in the second year. That is over a 12-month period. The effect was hardly traumatic. It is true that there was a drop in commodity prices during that period, but it was not a dramatic drop. The difference was that the Government were in a position to harness the benefit of the drop in commodity prices because they were moderating public expenditure, they were moderating taxation and there was moderation in wage levels.
Lord Butler went on in his Budget Statement to say— quite correctly as events have proved :
 high Government expenditure accompanied by high taxation themselves have an inflationary effect."— [Official Report, 11th March 1952 ; Vol. 497, c. 1288.]
Lord Butler was not the only one to embark on such a policy. Another Chancellor of the Exchequer formally in his Budget Statement in referring to expenditure on food subsidies said :
 that just cannot go on. We must call a halt…prices have got out of all relationship with realities ".
I am glad to see the hon. Member for Aberdare (Mr. Evans) in his seat. He will recall the number of occasions in Committee on which he quoted his hero, none other than the late Sir Stafford


Cripps. That quotation came from Sir Stafford Cripps's annual Budget Statement in which he was proposing to reduce food subsidies by a substantial amount, which he did. He, like Lord Butler, and as we shall be doing today, spoke of the need to face the realities of the situation.

Mr. loan Evans: Would it be true to say that there was a movement away from the food subsidies which were introduced during the war years, maintained by the Coalition Government and continued when Sir Stafford Cripps became Chancellor because of the Agriculture Act 1947? By giving subsidies to the farmers, by deficiency payments and guaranteed prices, the Labour Government ensured that the people had cheap food. That Act produced a prosperous agricultural industry and cheap food for the people. I cannot recall the Budget to which the hon. Lady referred, but I think it was at about that time.

Mrs. Oppenheim: Sir Stafford Cripps said that in his Budget Statement in 1949. He said:
 Prices have got out of all relationship with realities."— [Official Report, 6th April 1949 ; Vol. 463 ; c. 2085.]

Mr. loan Evans: The hon. Lady confirms what I thought. At about that time the 1947 Act came into effect. Subsidies were being removed because the Labour Government had kept down essential food prices by the Agriculture Act 1947, which the Conservatives have since repealed.

Mrs. Oppenheim: I do not think 1 should pursue that point, Mr. Deputy Speaker, because you might not think it was in order. The fact remains that Sir Stafford Cripps referred to the relationship between reality and prices, which is precisely the point I am making.
The value of the present subsidy is about 85p per average family per week. The effect of the amendment— again we can make only a rough forward projection — is that if subsidies were phased out over a three-year-period there would be a cost of about 7p per person per week, which is a trifling sum compared with the thousands of millions of pounds we would save. The effect on the retail price index would be approximately half of 1 per cent. per year over three years. It

would be for the Government to decide their priorities and on what they should spend money. They may wish to spend the whole of the money on milk subsidies. That might be a sensible suggestion, but again it would be for them to decide.
Having said that 7p was a trifling sum, I wish to make it clear that to many people 7p is not a trifling sum. To a pensioner it can mean an extra pint of milk or cream on Sunday. However, pensions are already indexed, and if the Government had followed our example and introduced a six- monthly review of pensions that would have helped considerably. Rather we proposed to introduce it.

Mr. Gwilym Roberts: The Conservatives propose a lot of things.

Mrs. Oppenheim: I might add that we continue to propose them in Opposition. If the sum of 7p were aggregated to a poor family, it would mean the difference between their buying occasionally what most people take for granted and buy all the time. We do not underrate the effects, but we have said that there are a number of ways in which a family could be recompensed and it would be for the Government to decide.
In reply to a Written Question tabled by my hon. Friend the Member for Altrincham and Sale (Mr. Montgomery) on 6th March, in column 505, we were told that the cost of providing a family allowance of 30p for the first child would be £60 million a year, allowing for tax clawback. The cost up to 1980 would be £300 million against a figure of £3,000 million for subsidy. If compounded over a period of three years, the cost would be about £360 million. Again, it would be entirely for the Government to decide in what way they wished to allocate resources or wanted to obey their own priorities.

Mr. Gwilym Roberts: I cannot understand the hon. Lady's argument. Is she suggesting that more national resources are available now than were available between 1970 and 1974? She spoke about allowances for the first child and implied that the Government could use this money for that purpose. Was not that money also available to the Conservative Government and could not they have offered


allowances for the first child? Why was such action not taken earlier?

Mrs. Oppenheim: I would remind the hon. Gentleman that he is comparing a period when the rate of inflation was 13 per cent. against a figure at present of 26 per cent.

Mr. Gwilym Roberts: What difference does that make?

Mrs. Oppenheim: It makes a great deal of difference. I am not suggesting that the Government should make this expenditure. I am suggesting that it is one means of compensation which would be available. I am comparing costs. If our amendment were accepted, by 1980 we would save £·2,000 million. That would have an effect in helping to restrain inflation. When suitable economic circumstances arise and money is available for expenditure, it will give the opportunity to embark on a number of priorities.
Hon. Members and Ministers have their pet projects and most of them are worthy ones. Some projects which come to mind are implementation of the Finer Committee's recommendations, assisting the removal of the tax on widows' pensions, help for disabled housewives and many others. They are matters on which all of us would like to spend money. If the money were available, one could spend the next hour conjecturing the sort of project on which one could spend it. But what is certain is that in the present situation that money is not there and we cannot continue expenditure at the levels proposed by the Government in their Bill. If by saving this money we were to succeed in helping to restrain inflation, that would be the finest social service possible.
This, in effect, is the moment of truth for the Government. They now have to balance economic realities against political expediency. They must now accept the former and reject the latter. We believe that our amendment provides an opportunity for them to do so. We regard it as a sensible and practical provision. It will allow them to change direction and show their resolve to overcome our economic difficulties, which are very great. We believe that it is crucial to the interests of the country and, indeed, to ail those who otherwise will inevitably suffer

directly the trauma of widespread unemployment and possibly also of economic ruin. We believe that neither the Government nor the country can afford to neglect this opportunity.

5.15 p.m.

Mr. loan Evans: I hope the House will reject the amendment. In Committee a similar amendment was tabled seeking to leave out the figure of £1,200 and insert £900. At least it can be said that the Opposition are making some progress.
I believe that the use of food subsidies has been fully justified. The action taken by the Labour Government in the last year can be fully justified by events, and I believe that the subsidies should be continued. I am not saying that they should continue ad infinitum. I believe that the subsidies should be reviewed in meeting the needs of the people. They have played a part in supporting the social contract for which the Government have been seeking wider support from the general public.
The Conservative Government operated a statutory incomes policy. That was coming to an end and needed to be replaced by something else. The hon. Member for Pudsey (Mr. Shaw) raises his eyebrows. I do not know whether he would suggest that they would continue a statutory incomes policy. If that is the case I give way to the hon. Gentleman.

Mr. Giles Shaw: The hon. Member for Aberdare (Mr. Evans) appreciates that the statutory incomes policy was being phased— phase 1, phase 2 and phase 3. I thought that the Government at that time came to an end before the incomes policy reached an end.

Mr. Evans: We now have a voluntary incomes policy and there are many parts to the social contract. One part involves the implementation of the food subsidies policy. This has been part of the social wage. When we look at the figures elsewhere, we can see the success of that policy.
I shall not become involved in arguments about the Common Market because I know that I shall be ruled out of order, but it is relevant to quote some figures from a recent document issued by Reuters and the Press Association based on retail food prices comparing London, Paris and Bonn. We find that


the price of butter in London under a Labour Government was 26p, in Paris 63p, and in Bonn 63p. The price of cheese per pound in London was 40p, in Paris 81p and in Bonn 139p. The price of bread in London was 8p a pound, in Paris 24p and in Bonn 21p. The price of milk per pint was 5p in London, 7·2p in Paris and 10p in Bonn. Therefore, we in this country are in a far better position than are the people in those other European capitals.
I believe that food subsidies have played a part in keeping down prices in this country. Although the Opposition accept subsidies, they do not now say that we should end them tomorrow because they realise that there would be difficulties. Time and again in Committee and in the House they have denigrated the purposes of the food subsidies. They have argued whether food subsidies should come via direct or indirect taxation. Personally, I am a direct taxation man rather than an indirect taxation man. I prefer to see those with the broadest shoulders paying through income tax for what we in Parliament decide should be the social benefits.
Even if the Opposition say that this money is coming not just from what my right hon. Friend the Chancellor of the Exchequer raises in direct taxation but from indirect taxation as well, there are good social arguments for doing that. There are good social arguments for putting a tax on smoking, on alcoholic drinks and on gambling, and for saying that we should subsidise essential commodities to ensure that the lower income groups have their breakfast foods on their tables and that little children going to school get their school milk and school meals. The Conservative Party, of course, may be following its new Leader, who does not believe in free school milk—

Mrs. Sally Oppenheim: The hon. Gentleman's Government have not brought it back.

Mr. Evans: I hope that the hon. Lady's intervention will be noted by my right hon. and hon. Friends and that in our next manifesto, or before, we shall think of doing that.

Mr. Leslie Spriggs: While my hon. Friend is dealing with what the Conservatives did when they were in

Government, I hope he will not forget that the right hon. Member for Finchley (Mrs. Thatcher) took school milk from our children.

Mr. Evans: That is the point I was making. I am glad to have my hon. Friend's agreement.
Then again, we hear arguments that food subsidies provide serious distortions. In the earlier Committee last year, we were warned that there would be massive shortages before last Christmas. Hon. Member after hon. Member said that if the Government pursued their policy of food subsidies we might well have difficulty before Christmas in getting milk, that there would be a shortage of butter and that there would be difficulty in getting cheese. I will not taunt the hon. Member for Gloucester (Mrs. Oppenheim) by asking her whether she has yet managed to obtain some Cheddar cheese. In the last few weeks she has said in Committee that she could not buy Cheddar cheese.

Mrs. Sally Oppenheim: I said at Christmas.

Mr. Evans: I did not think that the hon. Lady had difficulty at Christmas.
In any event, what has happened? Despite all the warnings from the Opposition of the terrible shortages which would emerge as a result of food subsidies, we find that there have not been shortages of those essential food items.
Whenever a Labour Government try to do something which is socially useful, it is always argued that it is bureaucratic. It was argued that food subsidies would mean the creation of a huge bureaucracy to administer the scheme. However, we read in the explanatory memorandum that only 160 staff will be needed to administer this vast public expenditure amounting to more than £750 million.
When we talk of creating bureaucracies, we should not forget that the Conservative Government had various token schemes. They were very expensive to administer. The administration was done in a very bureaucratic way and it was far more costly than this simpler method.
The hon. Member for Gloucester then referred to inflation. Of course we are passing through a phase where there is world inflation. There is an economic


crisis in the Western world. There are more than 7 million unemployed in the United States. There is worse unemployment in many parts of Europe. We are passing through a period of serious economic difficulty.
I intervened in the hon. Lady's speech to say that when the Labour Government came into power we inherited a very serious economic situation and were in the middle of a three-day working week. All the signs were that we were going into a disaster situation. I am convinced that that is why we had a General Election last February. But, in addition to the very serious economic situation, we inherited the previous Government's statutory incomes policy, including these threshold agreements which said that as the retail price index went up so wages would go up accordingly. If ever there was a design by a Government to assist inflation, that was it.
The policy which we have pursued of having food subsidies, of keeping down food prices and of keeping the retail price index down has had an effect on the wage inflation which would have occurred if it had not been done.

Mrs. Sally Oppenheim: Earlier the hon. Gentleman spoke of world inflation. However, in most of the major industrial countries inflation has declined and continues to decline rapidly. Where there is higher unemployment than would be acceptable in such countries, those countries have the opportunity to reflate and to overcome their unemployment. In this country we shall have high inflation and high unemployment together, which means that our scope to reflate is very limited.

Mr. Evans: If the hon. Lady is saying that after four years of Tory Government we were in a worse position last year to face these problems than many other countries, I agree with her absolutely. That was the situation. But those other countries which seem to be far more prosperous flan we are have higher unemployment figures than our own. When we look at the economic situation, we cannot be satisfied when we see the inflation still taking place here, but when we look at our unemployment figures, we see that we are far better off than many of those other countries.
As for subsidies, I remind right hon. and hon. Members that we subsidise other things. We subsidise the National Health Service, education and our social security system. We do it because we find those services socially useful. We also subsidise the arts. What is wrong with the nation being taxed to provide those things which are socially useful? I am sure that the Conservative Party has not yet reached the point where it wishes to abandon the Welfare State.
The hon. Member for Gloucester has referred to the differences in the Labour Party. Comments of that kind come ill from the Opposition, who have just ousted their Leader, who now have a new Leader, and when we can see all the changes taking place as a consequence. We see the right hon. Member for Leeds, North-East (Sir K. Joseph) coming in to formulate the new monetarist policies—

Mr. John Biffen: On a point of order, Mr. Deputy Speaker. We did not oust our Leader under Clause 1 of this Bill. May we have your guidance on whether the debate is straying outside the confines of normal order?

Mr. Deputy Speaker: I am grateful to the hon. Member for Oswestry (Mr. Biffen). I am afraid that I found the remarks of the hon. Member for Aberdare (Mr. Evans) so interesting that I allowed something to pass which I should not have. This war between Wales and Gloucester might come back to the motion now.

Mr. Evans: Perhaps I should not get involved. We know the difficulties, and we should leave them where they are. We have differences in both parties. I leave the matter there, possibly to return to it at a more appropriate time.
When the new Leader of the Opposition was elected, she emerged from one meeting and her comments were reported in the evening papers. However, they were very little reported in the morning papers, which is very strange because if there is one thing about Tory Leaders it is that generally speaking they are well reported in the Press. The right hon. Lady said :
The Tory philosophy is that you can't have what you can't afford.


That is Tory philosophy. I believe that what we cannot afford is a situation where, at a time of very serious economic difficulty, people with very low incomes find it difficult to provide themselves with essential foodstuffs. That is why many of us look forward to the day when we have a Socialist society, when we need not have Governments intervening in this way, when there will be greater equality, and when there will not be the tremendous disparities of wealth that we have at present. When that time comes, we may not need to think in terms of what the Government are doing now. But at present, when we have these difficulties, it is essential to have action of this kind.

Mr. Charles Irving: I am trying to follow the hon. Gentleman's argument. Perhaps he will explain one or two matters to me. He spoke about the lower paid. Surely there is no argument about the fact that there should be some sort of food subsidy for the lower paid. The argument is that there should not be food subsidies right across the board for rich and poor alike. There is a great need at the moment— I speak as chairman of a social services committee— for more money to be made available for social services to help the sick and the frail and to provide for the mentally and physically handicapped.

Mr. Deputy Speaker: Order. Is the hon. Gentleman intervening or making a contribution?

Mr. Irving: It was slightly longer than an intervention, and I apologise. Perhaps it is because I am such a new Member. I wanted to get home to the lion. Member for Aberdare (Mr. Evans) that there was no quarrel about helping the poor. The quarrel is about spending money on subsidising the well off.

5.30 p.m.

Mr. Evans: I am glad to have had the hon. Gentleman's long intervention because it expresses the view of the Conservative Party. Hon. Members get food subsidies, but I hope that they fill in their tax returns properly and pay tax. Millionaires get food subsidies, but they pay tax. The method of giving food subsidies in this way is simple. Everyone gets the benefit of food subsidies. The people with very small incomes do not pay tax. Therefore, they get them for nothing. People in the middle income groups pay for

what they get, so they are not getting anything at all. But the very rich, the wealthy, are paying the subsidies not only for themselves but for the less well off. I hope that we shall not have any cant from the Opposition about that matter.
We should realise what we are doing. No one should suggest that if we cannot evolve a scheme so that only certain people derive the benefit we should, therefore, stop everybody getting it. Indeed, it might be said that we can spend more on the social services. This Government have a better record than the previous Government in that respect, despite our present difficulties.
Reference has been made to Sir Stafford Cripps. At the end of the last war Churchill said that this country was bankrupt. However, that did not prevent us providing the Welfare State. We are now building on that Welfare State. But at the same time it is important to keep down the prices of essential foods for everyone, particularly for those with small incomes. We shall not argue with the Opposition if they want to spend more on the social services. When it comes to cuts in defence expenditure, the Opposition are silent because they want to spend more. But when it comes to food subsidies, they do not like that kind of Government spending. They have got their priorities wrong. This Government have got them right. I hope that the amendment will be rejected.

Mr. Giles Shaw: It is always difficult to follow the hon. Member for Aberdare (Mr. Evans) because of his fluency, but I am not entirely happy with some of the content of his speech. However, I will leave it to my hon. Friend who will be summing up for the Opposition to make a few apposite remarks.
Our argument in principle concerns what the Bill seeks to do. It seeks to reduce the amount which in time is to be sent on food subsidies. In Committee we reached broad agreement that we would like to see this objective accelerated. Hence, ply hon. Friend the Member for Gloucester (Mrs. Oppenheim) moved the amendment which indicates that we should he accelerating the process of withdrawal.
Despite discussions in Committee, one question which I did not think was adequately answered was whether people


in receipt of food subsidies would prefer to maintain the existing system or to have the money given to them as cash in hand. The Secretary of State for Prices and Consumer Protection indicated that the possible replacement of food subsidies by social benefits of one kind or another was her long-term intent. Those presently in receipt of food subsidies have probably not been asked whether they would rather have the 22p per person or the 85p per family. Does the Under-Secretary have a point that he wishes to make?

Mr. Maclennan: I was speculating whether the hon. Gentleman was suggesting that we might have a referendum on the subject.

Mr. Shaw: That possibly would not be necessary. I am sure that the hon. Gentleman can find other and simpler means of a constitutional kind whereby these consultations might take place.
There is an argument, which we accept, that in many cases indiscriminate social benefits are the only way to ensure that large amounts of social benefit reach those in greatest need. The right hon. Lady has made this point several times.
I would argue that that is the standard background to all the provisions of social benefit. It is nothing peculiar. There is always a problem of ensuring that these benefits are understood and properly claimed. I cannot believe that there is no way, provided that there is a will and the resources, of getting benefits to those in real need in the correct amounts. After all, the right hon. Lady is proposing to set up a network of national consumer council offices or advice bureaux to which those who are fortunate enough to afford expensive articles like washing machines or electric kettles with which they find fault can make complaint and seek advice for redress, which is a legitimate cause. Therefore, I suggest that one-tenth of the amount currently being spent on food subsidies could be spent on trying to find a method by which real social benefits get to those in real need. It is a matter of resources and of priority.
There is another reason why I firmly support my hon. Friend's proposal. We are concerned about the distortion effect of subsidies. We have expressed this

view in several ways, and there are two specific ways to which I should like to draw attention.
First, it is clear that in certain markets food subsidies are having a major distorting effect. The most obvious is that of butter and margarine. Butter, which enjoys a subsidy of about 12p a pound, is now, within a year, substantially cheaper than margarine. Despite the suggestion by the hon. Member for Aberdare that there was no shortage, I think that he will have to agree that the amount of liquid milk available for butter manufacture in this country has been seriously reduced and that the amount of imported butter substantially increased to 400,000 tons in 1974. That brought about an additional distortion, because ;it came at significantly greater cost than would be involved in the importation of raw materials suitable for manufacture into margarine. Therefore, there have been distortions in the way that that subsidy has affected the market.
I could make a similar point on the price of bakery articles— morning goods, rolls, and so on, and the price of bread. Such distortions damage not only the industries in which they occur but the confidence of those industries to continue. The confidence of the baking industry is at an extremely low level at this time.
Another distortion as a result of food subsidies, which I consider more important, concerns the price of manufactured foods. I declare an interest in a food manufacturing company. I regret that it does not produce subsidised foods. It is well known that those who have to compete in the manufacturing and selling of foods, who are not affected by having subsidies applied to their goods or services in the general market, face severe problems. They are still tightly controlled by Section 2 of the Prices Act 1974, to which this modest Bill is but an inadequate amendment. In my view, the Government have shown themselves not sensitive enough— I recognise the many discussions that the right hon. Lady has had with the industry— to the problems of manufacturing industry in general and of food manufacturing in particular. There is increasing evidence that there is a grave loss of funds to maintain employment and supply in many sectors of the food manufacturing industry.
I have referred to the plight of the bakers, which is well known. In the past year there have been more bankruptcies and closures of small independent bakers, and the large bakers showed a substantial loss on their manufactures during 1974. I understand that the forecasts for the industry for 1975 do not show adequate profits either.
The general position of the food manufacturing industry is dire. A recent survey conducted among 26 major food manufacturing companies, accounting for about 45 per cent. of the food trade, discussed the following main points: first, the progressive erosion of margins in the period 1971–74 ; secondly, that food companies' reference levels have fallen to 40 per cent., compared with the average for all companies, excluding oil, of 60 per cent. ; thirdly, that the return on capital has also fallen. That situation is standard throughout industry.
Above all, there was a serious cash outflow over the period 1972–74, due to falling profits and the inflation of stock values. This must ultimately lead to a reduction of capital authorisations and of employment, to the closure of businesses, and possibly to lack of variety and problems over maintenance of supply. I referred to such problems when we debated the Price Code earlier in the year. The Government wish to continue with the food subsidy programme at one end of the scale, with a combination of food subsidies and severe restraint on profitability through the Price Code system at the other end of the scale. There is increasing evidence that the food manufacturing industry is in a severe nutcracker.
The Bill makes two simple amendments, one on subsidy and one on price orders. It fails to make the most important amendment that we should see made now, which is to offer increasing flexibility within the Price Code and possibly even to abolish the code.

Mr. Deputy Speaker: Order. I have been even more generous to the hon. Gentleman than I was to hon. Members who spoke earlier. The amendment deals with the size of the subsidy.

Mr. Shaw: I am happy to accept your correction, Mr. Deputy Speaker. I was trying to relate the price of food that was subsidised to the price of that which was

not, and to point out the problem of maintaining supply.
With the subsidy system in operation, the problems of the non-subsidised section of the food industry deserve equal attention. Although the Bill does not offer an additional amendment, I urge the Secretary of State and the Government to continue their discussions with a view to reviewing the application of the Price Code.

Mr. Gwilym Roberts: I shall not take up the point made by the hon. Member for Pudsey (Mr. Shaw)—

Mr. loan Evans: My hon. Friend would be out of order if he did.

Mr. Roberts: Apart from the difficulties which my hon. Friend points out, I do not have the hon. Gentleman's expertise to enable me to discuss the implications for the industry of the operation of the Price Code. But it seems to me that as subsidies must marginally reduce the price of certain commodities, they tend to stimulate sales. I cannot see how that can have an adverse effect on the food industry. Perhaps the hon. Gentleman was suggesting what I often advocate, that the whole area covered by food subsidies should be enlarged.

Mr. Giles Shaw: The point that is so often ignored is that sales are one thing but profitable sales are another.

Mr. Roberts: I believe that subsidies are irrelevant to the argument, because their only effect must be to increase total sales, by reducing price, which must increase total profit.

5.45 p.m.

I had not intended to intervene in the debate. I was stimulated to do so by some of the hypocritical cant from the hon. Member for Gloucester (Mrs. Oppenheim). I am sure that she will not take personally anything that I say. She talked about some of the desirable things that she and her right hon. and hon. Friends would do with the £200 million that could be saved if the amendment were accepted. Where were she and her right hon. and hon. Friends between 1970 and 1974? They were on the Government benches, and had the power to introduce desirable provisions such as family allowances for the first child, which no Labour Member would argue against. The problems of poverty and inflation


did not appear with the election of a Labour Government. They existed a long time before that.

In any case, I believe that there are certain advantages in the food subsidy system compared with other systems for helping deserving sections of society. A food subsidy is universal. There is no need for means-testing. There is no need to find a particular area in which to give the help. Any other form of help, however well managed, normally provides help only to a particular section of the community. For example, providing help for the first child will not immediately help the old-age pensioner. This form of help reaches every member of the community, because subsidies are paid on essential foodstuffs.

The only result of accepting the amendment would be a greater increase in certain prices. Every housewife, as well as every hon. Member, should know what the amendment proposes. It would contribute directly to inflation by increasing the price of certain commodities.

I shall not make the considerable claims for subsidies that my hon. Friend the Member for Aberdare (Mr. Evans) made. I would not dare follow him as far as that. But, however marginal the effect of subsidies in reducing prices or keeping down increases, they are justified in the present situation.

There is one reason for the amendments. The simple answer was given by my hon. Friend the Under-Secretary when he replied to the hon. Member for Pudsey. Contrary to what the Opposition keep saying, it is only the poorer, the more deserving sections of the community, who benefit from the subsidy operation. The richer sections of our society are paying far more in taxes, and this more than offsets in their case, what they gain in subsidy. These subsidies amount to a direct redistribution of wealth in our society. It is only a very small redistribution, but it is a redistribution from the wealthier sections of the community to the poorer sections. The Conservative Party is opposed to that. Conservative Members are here to protect a very small section of very wealthy people. Fundamentally, that is what the amendment and their objection to subsidies are all about.

My personal reaction would be not that we should have a reduction in this figure but that it should be increased. As I have said to my right hon. Friend the Secretary of State on several occasions, I shall look forward to an increase in the figure and in the range and, perhaps, an extension of subsidies even beyond those on food.

I accept that there are problems in this matter. There are the problems of the borrowing requirement. I am sure that the hon. Member for Oswestry (Mr Biffen) would have intervened at this stage had I not mentioned that problem. He is concerned about the size of the borrowing requirement. However, my feeling is still that we should have not reductions in subsidies but increases, although we need not necessarily increase the borrowing requirement. What we need to do— my hon. Friend the Member for Aberdare touched on this matter—is considerably to increase direct taxation. That is the way by which we could contain increases of this type without increasing necessarily the borrowing requirement. It may not be popular with my right hon. Friend but some of us seriously feel that the Government's strategy may be marginally wrong in this direction and that they are not pursuing heavily enough the need to increase direct taxation. It is the fear that the Government might come to that sort of strategy, the fear of more taxation and of the transfer of wealth and income from the richer sections of the community to the poorer sections, which is the raison d'être for the amendment. I ask the House to reject it.

Mr. Richard Wainwright: The hon. Member for Cannock (Mr. Roberts), for all his eloquence, gets no joy at all from his own Government Front Bench when he asks for higher spending on food subsidies. He must know in his heart that the trend of the Government is all the other way.
It may be that the full-dress national memorial service for the unlamented food subsidies is to be deferred for perhaps a couple of years— I hope not for three years at the request of some self-appointed body of manufacturers. But, however long that memorial service may be deferred, today is essentially a graveside occasion. The mourners are few. The deceased is of extremely dubious


reputation, although possessed of an enormously bureaucratic corpus, and it is being slowly lowered into the soggy ground. It is no occasion, least of all for me, to try to pronounce any elaborate funeral oration. But one or two things must be said.
Ever since the right hon. Lady the Secretary of State appeared in the House in the role of Queen Canute, determined to prevail on the waves of inflation to go back— and I must say that if she could not succeed no one else could— from the Liberal Benches there has been manifest and consistent opposition, which has been shown throughout, in the Lobby and not simply in equivocal speeches.
One of the reasons for our opposition has been that we have seen from the beginning that, once embarked on this enormously expensive and bureaucratic exercise, it would become extremely difficult to withdraw from it. That is the plight in which the House is placed today, as the hon. Member for Gloucester (Mrs. Oppenheim) so clearly revealed in her lucid speech. In great haste, and because of an imminent election, the Government embarked upon this vast expenditure and upon creating an enormous bureaucracy, not only in Government but throughout the food trade, for administering food subsidies. This was done quickly. It had to be before the votes were cast. But the withdrawal will inevitably be a very long and expensive process.
In considering this withdrawal, which we must do if we are to consider the amendment adequately, two consequences of the food subsidies ought to be considered separately. There is what I may call, for shorthand purposes, the feathered pillow effect of subsidies, which makes life artificially easier in general terms for the ordinary shopper. The classic example of the feathered pillow is the tea subsidy, which just happens to create a little extra illusion as to the real price of drinking the products of the Far East.
However, much more serious is what I might call the loaded shopping consequence of some of the food subsidies. In this day and age, of all times, when so many hundreds of millions of people in the world are hungry for lack of protein, we have actually committed the blasphemy of making butter cheaper than margarine. At the very time when it

is ludicrous and very offensive to be using protein to feed our cows in their lush meadows, we are turning our backs on what is basically a much cheaper source of fats which would be acceptable to vast numbers of the British people— namely, margarine— by subsidising butter to an ever-increasing extent and not subsidising margarine by even ½p a pound.
The feathered pillow can, by skilled hands, be withdrawn gently but firmly and with reasonable speed. However, it will be very difficult to reverse the new shopping habits of housewives, especially young housewives who have started housekeeping in the age of subsidies, and the false idea of values which has naturally come to them. Therefore, time is required for the process to be gradually reversed.
I say this because I hope that the Government, now that they have embarked upon their deliberate policy of phasing out food subsidies, will pay special attention to restoring as soon as possible, in fairness to the housewife, the proper differential between margarine and butter.
The same is true to a considerable extent of cheese, which has been made artificially cheaper, even in some of its more fantastic and imported forms— fantastically cheaper than it ought to be, and cheaper than other spreads and high tea treats.
Second, as we on the Opposition side of the House are unfortunately obliged to assume the role of spectators in this matter we watch the fascinating procedure of the withdrawal of food subsidies, and we shall have a very interesting experiment in political honesty. We shall see whether, as the expenditure on food subsidies is reduced, as is suggested in the amendment and as the Government will do in any case, we have a pro tanto reduction in the direct taxation which hon. Members on the Government side have always said was the fount and supply of the cost of food subsidies. This was their view. We disputed it. We never admitted for a moment that any taxes are allocated to providing a particular benefit.

6.0 p.m.

I have always maintained, and I still do, that food subsidies are paid for just as much by VAT paid by the poor and by


the petrol tax, which the poor pay in their bus fares, as they are from the income tax of the better off. However, the case of Labour Members— especially that of the hon. Member for Aberdare (Mr. Evans), who is eloquent on this point— has always been that food subsidies are provided by squeezing the income tax payer, especially the high income tax payer.

Mr. loan Evans: I said that I would prefer the money for food subsidies to come from direct taxation. If the hon. Gentleman is able to read Hansard tomorrow he will find that I also said that there are good social arguments for taking it from indirect taxation. I went on to say that a good case can be made out for taxing gambling, tobacco and drinking— pursuits which are socially less useful— to ensure that the less well-off get these essential foodstuffs.

Mr. Wainwright: I follow the hon. Gentleman's point. When he extends his argument to include gambling, tobacco, drinking and other forms of vice he is still adhering to the idea that certain forms of tax can be allocated to certain benefits. Perhaps for the last time I must try to repudiate that view. The Secretary of State has herself been guilty of the suggestion that it really all comes from income tax. We shall see when the Chancellor presents his Budget in a few weeks whether, as food subsidies are gradually phased out, the level of income tax is reduced.
I shall recommend my right hon. and hon. Friends to support this amendment. We are delighted that the Tories will be on their feet in an attempt to get rid of food subsidies now that not only the General Election but also their little local election is out of the way. That is to be encouraged. I was disturbed to hear the hon. Member for Cheltenham (Mr. Irving), who is not now present, say that he favoured food subsidies for the poor. I hope that we shall be given a clear statement by the Conservative Front Bench that they bitterly regret introducing food subsidies on milk and butter when they were in office— they were an evil precedent— that they have turned over a new leaf with their new Leader and that we shall hear no more of this

indiscriminate and extremely wasteful benefit. We shall welcome this repentance.

Mr. Biffen: There has been one food subsidy which was deliberately restricted to what might arbitrarily be described as the poor. It was the butter token arrangement which proceeded under the auspices of the European Economic Community. I cannot recollect that the hon. Gentleman was evident and prominent in opposing that.

Mr. Wainwright: I did not have the pleasure of being present in the House when the "Selsdon Gang" was attempting to rule the country. In supporting this amendment, which is meant to prod the undertakers to get on with the burial. we profoundly hope that there will be a declaration that the money to be saved, whether it is the money suggested by the Conservative Front Bench or the money which the Government have decided to save anyway, will later be spent on increasing pensions for the old, on improving the whole system of family allowances, including the rates, and on improving social security benefits for the sick and ailing.

Mr. loan Evans: The hon. Gentleman has been using the argument of universality against food subsidies. He has said that everyone is getting them when they should not be. He is now prepared to give the family allowance to the first child. In that case the children of millionaires will receive the benefit as well as the children of the less well off. That is universal in its application. He will of course say that we shall get that money back in tax. The same applies to food subsidies.

Mr. Deputy Speaker: Order. That is the third speech the hon. Gentleman has made.

Mr. Wainwright: The hon. Member for Aberdare tempts me, but I am sure I should incur a rebuke from you, Mr. Deputy Speaker, if I were to follow him into an argument on just which taxes pay for which benefit. I cannot admit his point, but it would be unfair to the House to pursue something which should be discussed in the Tea Room afterwards, which I shall look forward to doing.
We shall support the amendment. We only wish that a firm and stern opposition to food subsidies had been manifest from the Conservative benches long ago.

Mr. McElhone: I do not wish to take up the remarks of the hon. Member for Colne Valley (Mr. Wainwright) too much, but if we accept his nutritional argument the Secretary of State should have subsidised margarine rather than butter. I should have thought that soya beans, carrots and lettuces would have been much better than, perhaps, sugar. We have never advocated that type of diet, however much better it may be nutritionally. We believe in giving people a choice, even if it is to their disadvantage. That is a principle the Labour Party have stood by.
I want to persist in my argument with the hon. Member for Gloucester (Mrs. Oppenheim). She said that my visits to the Committee were fleeting. Lest that is not recorded properly, I point out that I was serving on two Bills at once. Although the hon. Lady is a much more attractive debating opponent than my hon. Friends in the Scottish Grand Committee, she was not helpful in meeting me on a point I put to her.
In a compassionate way she accepted that there was a need to help. She argued the point about an allowance for the first child, which I would not dispute. She mentioned extra social security benefits. The hon. Lady will recall that in Committee I pointed out that millions of people on low incomes— often on fixed incomes— had no children and were not on social security. She graciously accepted that point. Therefore, I ask her to tell the Government how she would cater for the large number of people who are finding it extremely difficult to make ends meet, and to have a proper balanced diet. Although the amount of subsidy may be limited, it is important.
It has been argued that help should be given in a different way. The value of subsidies must always be assessed by the percentage of take-up. No one could advocate any other form of subsidy which did not have the 100 per cent. take-up that food subsidies have.
It has been said that millionaires' sons and daughters would benefit from the subsidies. I do not want to become

involved in the fiscal argument about who pays what tax and whether it should be direct or indirect taxation. I took umbrage at the introduction of butter tokens by the Labour Government. If a housewife is queueing at a grocer's shop and has to hand over a token, a stigma is placed upon her. Family dignity is involved here, and that dignity is no less important than the dignity of Members of this House.
We could devise a highly selective scheme, but that would put the "pauper" stigma on many people. There is a need for subsidies to be across the board, even though they are not selective and perhaps consume more public money than other methods. Many hon. Members will recall the stigma which, during the 1920s and 1930s attached to people like myself, who, because of family circumstances, had to wear what were called "corporation clothes ". They comprised a grey suit with a red stripe and a pair of boots which must have been made in John Brown's shipyard, because they never wore out. I still recall those days.
I do not have any prejudice against those who were the masters at that time for doing those things. They were wrongly advised. They did not realise what they were doing to people. I realise that subsidies cannot be continued for ever, but I hope that as long as they do go on they will be across-the-board subsidies. If they go to people who do not need them, that is a justifiable extravagance if at the same time their use prevents any stigma attaching to poorer families. That is why family income supplement had such a poor take-up rate. The across-the-board subsidy has a 100 per cent. take-up.
I would have accepted the political honesty of the argument advanced by Conservatives in seeking to reduce food subsidies if they had carried that argument to its normal conclusion. I have never heard Tory Members saying that the tax relief on mortgages— a subsidy which goes to people owning houses worth £25,000, £30,000 and more— should be ended.
There was another form of relief for people who had second homes. I never heard anyone criticising what seemed to me to be a wasteful expenditure of public money. A whole range of subsidies goes


to the better-off. Thousands of poor families who pay income tax are helping those on large incomes to pay for their fashionable houses— houses such as poor people can never aspire to.
The hon. Member for Gloucester said that the Opposition were considering a phasing-out period of three years. I would like to hear what the hon. Member for Oswestry (Mr. Biffen) has to say about that. I am sure that he does not regard three years as a reasonable period. With his philosophy, I am sure that that is three years too long. The hon. Lady talked about a lack of resources, and said that a lack of Civil Service assistance had prevented her from making the best case. I thought that Tory Central Office was a great provider of information. Perhaps the chopping of heads that is going on there does not lend itself to efficiency.
We have heard quotations from previous Chancellors— Sir Stafford Cripps, Lord Butler, and others. The hon. Lady must accept— she was in the House at the time— that the man who did most to stoke up inflation was a Chancellor of recent times— the present Lord Barber. The hon. Member for Oswestry was a consistent and honourable critic of the Tory Government's financial policies. Indeed, he was a prophet. and foresaw the calamity which faced us just before the February General Election. He often chided the then Chancellor about his policy of money supply which was stoking up inflation and which began the trend that has led us to our present serious problems.
I accept that there is a high rate of inflation. I accept that the rate of inflation is falling in other countries, but not quickly. I do not claim to be an economics expert, but I would point out that we have a lower level of unemployment than do many other countries. As long as we have a high rate of inflation. I maintain that there is a need for subsidies of this nature.
I apologise to hon. Members, in that I shall have to leave the Chamber when 1 have finished my speech to attend an important meeting elsewhere in the House.

6.15 p.m.

Mr. Biffen: I assure the hon. Member for Glasgow, Queen's Park (Mr. McElhone) that I will at once acquit him of any discourtesy if he leaves the

Chamber. My only regret is that it may be some time before he is able to read my remarks in Hansard. None the less, I shall be referring to him in my speech so he need not feel too neglected.
There is something of a tradition that the Report stage of a Bill sees the same band of the faithful in the rather cavernous surroundings of the Chamber conducting the controversies which were fought over in a rather more intimate fashion in Committee. This afternoon has been no exception. We are all veterans of one sort or another. The hon. Member for Colne Valley (Mr. Wainwright) carries not only the Prices Bill Ribbon but also the Prices Bill Ribbon and Star because, like me. he has seen through two of these Bills. We hope that we shall be spared another. When the hon. Member talked about the graveside rehearsal he was clearly speaking with some optimism.
I regret that there has not been a wider audience for these debates. This argument is very much about the social wage, or at the least the food subsidy component of the social wage. I see from the nods of the hon. Member for Brigg and Scunthorpe (Mr. Ellis), an Assistant Government Whip, who is doubtless sensitive to the mood of his back bench flock, that this is a topic of sonic considerable concern. I have no doubt that had they reflected more carefully on the order of business his hon. Friends would have been here to make clear their views on the subject, because this debate proceeds under the impending prospect of the Budget.
There are three points I wish to raise. The first relates to the phasing out of subsidies which, I hasten to assure you Mr. Deputy Speaker, is related specifically to the amendment. Second, I would like to take up some of the points made by the hon. Member for Aberdare (Mr. Evans) about the degree of education contained in this process. Third, I wish to make a few comments on the taxation implications, which, again, were touched on by some hon. Members.
The amendment. which seeks to delete £1,200 million and insert £1,000 million, is, as the hon. Member for Aberdare said, a re-run of an exercise in Committee when we sought to insert the figure of £900 million rather than £1,000 million.


What we were trying to do was to give some reality to the aspiration of the Secretary of State when she said on 30th January :
 It still remains our intention eventually to run down the programme, but the timing of any running down of the food subsidy programme must be related closely to the introduction of appropriate social benefits."—[Official Report, 30th January 1975 ; Vol. 885, c. 636]
Since a great deal of the subsequent discussion has been about social benefits as well as the food subsidy programme I do not think there would necessarily be a great gap between the two sides on that. It will not be any refinement of social policy that will govern the rundown but other, much more sombre external restraints which inevitably befall any economy which is as heavily dependent upon overseas borrowing as we are.
We know from the Government's Public Expenditure White Paper, Cmnd. 5879, paragraph 36, that the Government
 will also aim to reduce expenditure on food subsidies during the course of the Survey period.
There is not really a great divide, I suppose, at this point in my argument, between the two sides of the House. We are seeking, through the means of a standard form of amendment, to glean a little more of the Government's thinking about their pace of rundown.
We would be excused for not being over-impressed by the public expenditure figures because we know— this is not a party point— that public expenditure forecasts are unreliable guides to the future behaviour of Governments. Probably the only column of figures which has any credence in that document is that containing the public expenditure proposals for next year. Everything thereafter is a declaration of good intent.
We naturally had our appetites whetted when we read in the Sunday Telegraph of last Sunday under the heading
 Food subsidies on way out
an article by Mr. David Steer, the agricultural correspondent, in which he said :
 The present plan under discussion inside the Department of Prices and Consumer Protection is to end all food subsidies by early 1976.
I was invited by the hon. Member for Glasgow, Queen's Park, to say how I felt about the possible liberal timescale that is envisaged by my hon. Friend's amend-

ment. I am happy to support the amendment, which I thought my hon. Friend the Member for Gloucester (Mrs. Oppenheim) moved with great erudition and grace. She referred, among others, to Sir Stafford Cripps, who must have passed this life before she was born. Hers was a charming performance, and I am happy to support the amendment, but if I am to believe the Sunday Telegraph it looks as though the Government have acquired the grisly logic of my reasoning. We should like to know more about the timescale which the Government have in mind for reducing food subsidies. I could quote from the White Paper or refer to the right hon. Lady's professed objective of running down the subsidies and I should, therefore, like to know what the Government have in mind.
That takes me to my second point, which is the educational one, that all this will involve a painful process. We have to resist the temptation smugly to point out to Labour Members that we have pointed the way which they are now following. One has only to listen to this debate to realise that the right hon. Lady does not merely have the disagreeable task of following rather tardily in the wake of my right hon. Friends but is being encouraged by some to pursue exactly the opposite policy and not reduce food subsidies— which, after all, is her own professed policy— but increase them. We had that argument advanced by the hon. Member for Cannock (Mr. Roberts).
I regard also as evidence of substance, which deserves careful treatment by whoever winds up the debate, the evidence that has been presented by the TUC in its Economic Review for 1975. This says, in paragraph 103:
 In order to protect the position of family budgets in the coming year the TUC recommends that an extra £100 million should be allocated this year to food subsidies on top of the amount already being spent.
In case anyone thinks that this is an alternative to expenditure on other social policies, let me tell the House that under Table 15 entitled "Main Expenditure and Tax Changes "in its Economic Review, the TUC advocates not only the additional food subsidies of £100 million but an allocation for one-parent families and for further family allowances.
This is one of the terrifying unrealities of political debate as currently conducted.


The right hon. Lady and the Government are being pressed to increase food subsidies, and also to increase other social expenditure. Indeed, perhaps the biggest villain of all— except that he is a man of such charm and, I hope, of limited political muscle ; I do not mean that unkindly— is the hon. Member for Cannock, who produced a scheme for reducing the pensionable age for men from 65 to 60 and invited the House to vote on his Ten-Minute Rule Bill.

Mr. Gwilym Roberts: I think that the hon. Gentleman is misrepresenting the scheme somewhat. It involves a base retiring age of 60 and provides a flexible system for retirement between the ages of 60 and 70. It does not involve an immediate financial cost, which would be rather prohibitive, with a drop to the age of 60. It is typical of the scheme that there will be no financial cost whatsoever, but if there is it will be marginal.

Mr. Biffen: I have no wish to stray from order, but I congratulate the hon. Gentleman if he has devised a scheme which seemingly provides the attractiveness to the male national insurance contributor of being able to retire at 60 without any further impost on public funds.

Mr. Gwilym Roberts: It is not as simple as that.

Mr. Biffen: I realise that, but the attractiveness of the scheme lies in its seeming simplicity.
In the educational battle that has to proceed about food subsidies I think one is entitled to refer to what was said by the hon. Member for Aberdare. He said that this amendment would reduce the figure from £1,200 million to £1,000 million, but in Committee upstairs we moved an amended figure of £900 million, and from that he sought to draw the conclusion that we were edging forward towards the Government's view about food subsidies.
That is not the area where the educational battle will take place ; it will occur between the Treasury Bench and the TUC, because the advice being proferred by the TUC is simply not capable of being put into effect by the Government in the Budget. The advice that is being proffered by the hon. Member for Can-

nock is not capable of being put into effect in the prospective budget.
Painful times lie ahead for all of us, but in political terms they will be more painful for hon. Members below the Gangway than for those who sit opposite the Treasury Bench and who invite them to pursue the more stony path of economic reality.
That takes me inevitably to the third consideration— the tax proposals. For one awful moment I could visualise circumstances in which the hon. Member for Brigg and Scunthorpe (Mr. Ellis) would run hotfoot to the Treasury and say, "I have news for you. Because of what has happened at the Report stage of the Prices Bill, you will have the chance of pleasing in one Budget both the hon. Member for Cannock "— because taxes will be increased, so that his advocacy of higher taxes will be sublimated— "and also those Tories who are advocating lower rates of food subsidies "because I am certain that we, too, will eventually be placated. Indeed, we have ample evidence that it is the Government's intention to reduce the rate of subsidies, but it is unrealistic to think in terms of food subsidies without tax concomitant.
I think that there are now quite serious implications for all those who are concerned about the direction of taxation under the current economic management of this country. One has only to turn to paragraph 28 of the Public Expenditure White Paper, Cmnd. 5879, to see there all the possible rates of growth which were considered by the Government when indicating what they thought should be the range of options. It says:
 In all three cases, the rate of increase would be significantly less than the growth rate of output, and this suggests that there would be an increase in the burden of taxation.

6.30 p.m.

This brings us back to the heart of a great deal of argument about whether this is one of the most sensible means of pursuing a social policy, about the whole concept of the social wage and whether the totality of taxation which must finance this expenditure will come in so distinctive a fashion from a different class of the community from those who will be the major recipients.

Those of us on the Opposition benches, whether we sit on the Liberal bench, the


United Ulster Unionist bench or even the Scottish National Party bench— I dare say they would be at one with us— are convinced by overwhelming logic that with public expenditure and taxation at their present levels the same sections of the community who would be pre-eminently financing these expenditures would be those supposedly benefiting from them.

The whole matter becomes a grotesque and frightening exercise of transferring not from Peter to Paul, but from Peter's right pocket to Peter's left pocket. Already, some thoughts along these lines have been indicated by the Chief Secretary to the Treasury. When speaking at Worsley, in Lancashire, on Saturday of last week he was reported as saying :
 Varying the level and growth of our spending at home is an effective way of adjusting the balance of payments. Given the huge size of the deficit we must tighten our belts. Everybody, including the Government and local authorities, must bear their proper part in this exercise of restraint.
He went on to say, in the context of the general increase in the burden of taxation :
 It cannot be loaded completely on to the shoulders of a few millionaires. There aren't enough to go around.

The Chief Secretary did not put it in more harsh terms, doubtless for fear of causing unnecessary offence to his friends from the Tribune Group. But that is the underlying reality. That is what makes this, as a technique in social policy, as much a busted flush as a technique of manipulating the Index of Retail Prices, so preventing the triggering of thresholds.

I believe that we have to proceed to that final consideration. Many who watch what goes on in the House and are still kind enough to believe that it is of some significance, indicating the heart and mind of the nation, will wonder what Parliament will do and how it will think about these affairs in the context that we now have, apparently, a borrowing requirement of between £6,000 million and £8,000 million. This is a situation in which our whole national finances seem perilously dependent upon our ability to borrow in the Middle East— an area notoriously volatile. In that situation, I should have thought that every wellwisher to this country would hope that we would do everything possible as quickly as possible to bring total public spending and total public revenue into some balance.

In those circumstances, it is the transfer payment and subsidy payments just such as these which are the obvious candidates for retrenchment. We may like to argue this in terms of social policy and to put forward what we believe are alternatives and superior ways of attending to the social programme with other torms of social expenditure as an alternative to payments on subsidies. What is expected of us from the friendly world outside is that we should see this as an area of major retrenchment tout court, not as an area where we are going to save in order to have more money to spend elsewhere. There will be some measure of that, I do not deny, but there will be a moment of truth which will break on us sooner rather than later.

The way we react in this debate and the way we vote will be an indication to the would outside whether the House is yet prepared to face some of those realities.

Mr. John Wakeham: These amendments go to the very heart of the debate over our subsidy policy, and therefore they are very important. The amendments are constructive, in that they show the clear intention of the Opposition, if these amendments are accepted, to phase out subsidies and to give the Government some latitude over the time that they would take over the phasing out.
In Committee it was generally felt by both sides that the long-term effect of subsidies would be no solution to our problems and that, in principle, they were undesirable as a long-term solution. However, there was some agreement that they could play a short-term solution to some of our economic difficulties, in that they could possibly have a short-term effect in cushioning a sudden and steep rise in the basic cost of food. This could be helpful to Government if it would enable them to persuade the people to accept a voluntary incomes policy.
It seemed to me that there was something in this argument in the period 1973–74, when many of the costs we were facing resulted from substantial increases in world commodity prices outside the control of any Government. I believe that at that time there was a limited case


for food subsidies, but only as a temporary measure. Those days have gone. World commodity prices are not rising. They are tending to fall. Still in this country we have very high rates of inflation. They are domestic rates of inflation which we create ourselves. We can have as much or as little inflation in this country as we determine, from factors under our control.
Therefore, the real debate is not about whether subsidies are likely to be a long term feature of our economy, but about the rate at which we should phase them out. I do not believe that it has been entirely obvious to some of the back bench supporters of the Government, but the Government are themselves, in effect, beginning to phase out subsidies as they have to admit that they cannot match the increase in the prices of basic foods with further subsidies. They are having to weigh the realities of the situation, that the rise in prices of basic foodstuffs cannot be matched with increases in subsidies. The effect is gradually to reduce the significance of subsidies, and there is, therefore, a tendency to phase them out.
Our proposal is that subsidies should be phased out over about two years. The effect would not be anything like as dramatic as hon. Members on the Labour benches have tried to make out. The effect of reducing the subsidy bill next year by half would be about ¾per cent. on the Index of Retail Prices and this is at a time when prices are going up by 20 per cent.
I therefore believe that it is important to give serious consideration to the amendments, which are designed to give a lead to the Government on a method of phasing out subsidies, not in one year, but in two years. We suggest reducing the figures over the next two years so that we can get back to facing reality and dealing with the problems of inflation and, indeed, helping the poorer off sections of the community in a much more effective and efficient manner.

Mr. Michael Neubert: The amendment inevitably raises all the same arguments that a rose in Committee. It will profoundly relieve you to hear, Mr. Speaker, that I do not intend to return to all those arguments.
The proceedings in Committee were characterised by a great deal of amica-

bility. Despite all the evidence to the contrary, there was fundamental agreement on the principal purpose of our amendment, namely, the phasing out of food subsidies. There are declarations on both sides to support that view. The difference of opinion a rose not on the principle of the phasing out but on the pace. The amendment has been tabled in an attempt to quicken the pace.
One overwhelming impression which remains is the slightness of the impact of subsidies by comparison with the weight of effort which goes into the whole administration of the food subsidy system. At the end of the day we are faced with the bare, crude arithmetical calculation that the spending of about £1,200 million. as envisaged, over two years results in an average arithmetical benefit, per person, of 25p per week. That is an astonishing exercise in the machinery of government.
Over the course of the months during which subsidies have been introduced we have seen that vast numbers of people are engaged in the administration of the subsidy system. To quote the Chancellor of the Exchequer in his Budget Statement last November. in another connection, it is like burning down the House of Commons to roast a chicken.
We are not in disagreement about the Secretary of State's proposed objective to help those who need help most. We are fundamentally divided on the method used to achieve that end.
Faced with the attempt to secure the needs of the worst off and most in need of help, we must look for other reasons. We accept the very praiseworthy reasons advanced by the Secretary of State, but we doubt their effectiveness. Inevitably we are forced to look for less praiseworthy reasons for the retention of the subsidy system.
We are beginning to believe that, perhaps in some natural sequence of events. this is a resolute defence of the Secretary of State's empire. The right hon. Lady recently gave a television interview. I must be careful here, because not only is she supported this evening by her cohort of civil servants under the Gallery ; she is flanked by her two principal lieutenants. If the hon. Member for Colne Valley (Mr. Wainwright) is right, and we are attending a funeral, perhaps they are here


in the rôle of undertakers' mutes I do not know.
A remarkable reply came from the Secretary of State during that television interview. She was asked whether her Ministry actually did anything. That was an extraordinary question from an otherwise friendly interviewer. The right hon. Lady replied that the Department did something ; it administered the subsidy system, and that involved a great deal of work.
It is the raison d'être that we have a subsidy system to employ the very many people engaged in the administration of the system within the Secretary of State's Department. This has behind it a much more serious and fundamental point. It is not a criticism alone of the Secretary of State or of the Department of Prices and Consumer Protection. Over the years, under Governments of both colours—red and blue— there has been, increasingly, a trend of people moving from productive employment to nonproductive employment. Over the 10 years to 1972, the increase in the number of those engaged in local government was 48 per cent. and in the number engaged in national government 11 per cent.
If this trend continues, a serious situation will develop, in which the natural wealth of the country, from which all these social measures are to be derived, will increasingly diminish through lack of application by the people available to do the work.

6.45 p.m.

Bureaucracy is not an unimportant matter when we consider the whole question of a subsidy system, because it requires people to be engaged in nonproductive work. Less than half the work force is now engaged in the production of tradeable goods, as they are called— in other words, the very goods we need to produce not only for our use here at home but to export and earn our way in the world, to create the very wealth which hon. Members on both sides wish to see diverted to those in need.

It is important that this empire should not be defended for its own sake. We know from our experience of large organisations how they take on their own justification, over the years, by the very merit of the everyday work they do,

which comes to be seen as inevitable when it is, perhaps, nothing of the kind.

The second suspicion that comes upon one is that this is, perhaps, some part of a political public relations exercise. Again, a hint was given in that self-same television interview when it was stated that although there was a recognition of the ultimate futility of trying to cope with raging inflation by such measures— the scale of benefit would be minimal ; about 5 per cent.— the Secretary of State, in a vivid phrase, said "We will be cutting off the top from the mountain." When we are faced with inflation in excess of 20 per cent. a year, and rising, such an effect is minimal. This is no mere mountain ; it is a volcano which continually erupts, and which, as my hon. Friend the Member for Gloucester (Mrs. Oppenheim) has indicated, is well in excess of the rates of inflation operating in other parts of the comparable industrialised world.

So we must be suspicious that here, too, there is perhaps the dramatist's attempt to suspend disbelief— the device by which we are invited not to believe the evidence which is before our very own eyes, that although prices are rising very rapidly in the shops the very fact that it is known that the Secretary of State for Prices and Consumer Protection has introduced food subsidies in some way consoles the forlorn housewife in the belief that prices are not rising after all. I hope that this is an unworthy suspicion and will be disproved, but on the evidence that we have considered at great length in recent weeks it is very hard not to believe it.

So we return to more forthright colleagues of the Secretary of State on the Government Benches, who would like to see not less but more paid in subsidies. This is an extraordinary proposition, and is against the evidence of their own Minister. I gather from listening to them that they tend to believe that these subsidies and all the social service measures they bring forward are derived from taxation. As my hon. Friend the Member for Oswestry (Mr. Biffen) has so brilliantly argued, we cannot say that. More likely it is that these social measures are being achieved by foreign borrowings on a scale never known before in this country, certainly not in peacetime, and now estimated to be running at about £8,000 million a year.

When hon. Members quote with some derision the very sensible statement that one cannot have what one cannot afford they are, perhaps, being a little less careful than they might otherwise be. It is true that, normally, one cannot have what one cannot afford. But there is a method by which it can be done, and it is called hire purchase. That is the present state of this country. We are in hock up to the hilt to the Shah and to the sheikhs of Araby, who are lending us money for us to sustain a level of living far beyond that which we are earning.

We must recognise that the food subsidy system, so long as it continues, conceals the reality of the situation from the people. With a debt of that order running at about £8,000 million a year, it is time for home truths. Where better to make a start in telling the people a few home truths than in the home, by letting the housewife know the true price of food, by phasing out these food subsidies as quickly as we possibly can.

Mr. Ian Cow: Exactly that which was predicted during our de-dates on Section 1 of the Prices Act 1974 has come about. Within a period of a few months, the Government, having embarked on a policy of food subsidies, have to come back to the House of Commons and ask for more. Yet, despite the predictability of the Government's conduct this afternoon, there is an air of unreality about this debate because the Secretary of State has to walk the most terrifying tightrope which will require all her charm and skill to negotiate successfully.
What the right hon. Lady has to do is, at one and the same time, to justify to the House an increased maximum figure of £1,200 million on food subsidies and not only to convince her hon. Friends, notably her hon. Friends below the Gangway— I suppose she has some—that this sum of £1,200 million is necessary now, but to prepare them for marching in precisely the opposite direction within a very few months.
The level of food subsidies and the decision about their level is passing, if it has not already passed, from the Secretary of State and the British Government to the oriental money lenders upon whom we are becoming increasingly dependent. It is true that the right hon.

Lady and other Ministers still give the appearance of exercising power, but more and more power is passing from the Government to these upon whom the Government depend for borrowing money.
I have great sympathy with the right hon. Lady, because the stronger the case which she makes for sticking to the figure of £1,200 million as the total amount of food subsidies which the Government may spend the more difficult it will be for her when the inevitable U-turn takes place later this year.
I wish to turn to a point made by my hon. Friend the Member for Oswestry (Mr. Biffen) in a characteristically excellent speech. He said that the right hon. Lady had sought to defend food subsidies partly on the ground that even though on her own admission, 52 per cent. of the total expenditure on those subsidies goes to families earning more than £50 a week, that did not matter very much because the money was levied in taxation from the rich. That just is not true. The so-called redistributive element in food subsidies is more of a myth than a reality.
The proposal to continue and, indeed, to extend food subsidies at this time is a sign that the Government are still going in the wrong direction— but at least we have the assurance that the Chancellor of the Exchequer has indicated that on all other aspects, and notably in the nationalised industries, we are moving away from subsidies. It is a great comfort to the Opposition that the right hon. Lady will at least shortly be following where her right hon. Friend has begun to lead.

Mrs. Shirley Williams: I begin by dealing with some of the points raised in this interesting but repetitive debate. Virtually every argument advanced in the debate has been deployed at considerable length and in detail in Committee. It is difficult to find new arguments on either side, and I strongly suspect that we both remain highly convinced of the arguments which we have been advancing for many months.
What I find very strange are the Opposition's continual attempts to suggest that in some odd way the position of the Government has altered. In fact, the position of the Government has been


consistent throughout. When we introduced the original Prices Bill in the spring of 1974 we made it clear that we believed that food subsidies have a significant transitional role to play in a state of high inflation. We made clear that we were not wedded to their perpetual continuation, but we indicated that we believed that they had a serious rôle to perform at least for some years.
The interesting thing is that the Opposition came round to agreeing with us. As recently as six months ago that is what they said in their election manifesto. It is they today who are in full retreat from their own manifesto statement, who appear to want to have nothing to do with food subsidies and who find themselves expressing a rigidly orthodox free market view. It is a remarkable conversion. It is not a view which we share, and it would be gracious of the Opposition to recognise that under new leadership, in terms of their Shadow Minister and the Leader of the Opposition, they appear to have adopted a much stronger line than they did when fighting the last election.
The hon. Lady the Member for Gloucester (Mrs. Oppenheim), in a charming admission, said "When we are in opposition we propose." But it is the Government who dispose. It is our view that food subsidies have a very important function to perform in terms of protecting the least well-off against some of the blows of inflation until such time as there can be an adequate social system to protect them.
My hon. Friend the Member for Cannock (Mr. Roberts) was right in saying that we have this frequent repetition by the Opposition of the need to phase out subsidies and to introduce social services, many more of which have been advanced while the present Government have been in office than in the previous four years when the Conservative Party was in office.
The two most substantial real increases in pensions were made by my right hon. Friend the Member for Lanark (Mrs. Hart) in 1964–65 and then by my right hon. Friend the Member for Blackburn (Mrs. Castle) in 1974–75 with a 30 per cent. increase in the pension level. The first proposal for an increase in family

allowances for seven years has been made this year. There was no increase whatsoever in family allowances in the period when the present Opposition party was in power. The first serious proposals for extending family allowances to the first child was made by the present administration.
The Opposition really must come off the seesaw on which they find themselves when they constantly advocate that we should phase out food subsidies and bring in social service benefits when they did not bring in food subsidies or benefits on the right scale.

Mr. Richard Wainwright: Is the right hon. Lady about to unveil a policy for dealing with the intolerably low earnings of 2 million of our citizens who are in dire need?

Mrs. Williams: The hon. Gentleman has consistently argued this point. Of course, the Government accept that there are anomalies in the social contract based on low pay. Secondly, it is not least this group whom we have in mind in our food subsidy policy, a group which cannot be reached in any other way.
A number of points have been made, not least by the hon. Member for Rom-ford (Mr. Neubert) and also by the hon. Member for Pudsey (Mr. Shaw) about the colossal administrative and bureaucratic machine which I am supposed to have erected. I am supposed to spend my time admiring this Heath Robinson machine consisting of thousands of civil servants who are uselessly employed on pointless subsidies.
I am sorry to have to reiterate that food subsidies are administratively just about the most economic system devised for helping the lower income groups. The straight cost, it is worth repeating, is 1p of administration for every £7,000 worth of subsidy, compared with 1p of administration for every 4p of subsidy in the case of butter tokens. If the Opposition push me, I can be very dull on the subject of family income supplements, rent rebates, rate rebates and many other things. Virtually every means-tested benefit, in terms of useless bureaucratic expenditure and bureaucratic employment, requires incredibly more administration.

7.0 p.m.

Mr. Gwilym Roberts: One thing that worries me is when my right hon. Friend sometimes talks about the long-term aim of phasing out food subsidies. Will she say what is her long-term argument for moving in this direction?

Mrs. Williams: I hope that my hon. Friend will allow me to proceed, and I will come to that aspect of the matter in due course.

Mrs. Sally Oppenheim: Do the Minister's expenditure figures include expenditure by local authorities for providing staff for enforcing the regulations and putting them into effect?

Mrs. Williams: These are essentially central Government figures because it is impossible to allocate expenditure on the different functions of the trading standards officers. However, the hon. Lady will see that the increased expenditure in that field is lower than in the case of most means-tested benefits as a proportion of the whole.
The hon. Member for Pudsey managed to squeeze into a debate on food subsidies a speech about the Price Code. Quite a lot of the arguments that he was advancing appeared to be directed against such matters as the base date for baking, which has been one of the great causes of difficulty for the baking industry, as the hon. Member will no doubt readily admit. This is something we are gradually trying to change in the light of investment, and, although he does not believe that the investment relief and productivity deduction go far enough, I hope that the hon. Member will give credit in agreeing that this is not a doctrinal matter and that we have attempted to move to meet the real grievances, where they are real, of some of the food manufacturers.
I shall come later to what the hon. Member said about phasing out subsidies, But first I should like, greatly daring, to raise one point that was mentioned by the hon. Member for Oswestry (Mr. Biffen). I fully appreciate that our views could not be further apart, and I hope that he will also accept that there is no necessary consequence for public sector borrowing requirement of the food subsidy policy. There is only a requirement if that subsidy policy makes a net call

on the public sector borrowing requirement.
Like my hon. Friends, I believe that there is a strong case in a society under great economic pressures for, if necessary, increasing taxation in order to finance this kind of policy, and I make no bones about that. We believe that in a society under stress the Government, above all, have a major responsibility to protect the least well off. The hon. Member will recognise that, in spite of his remarks about the Government's public sector borrowing requirement, the monetary supply figure. known as M3, the broader figure, has increased at only just over half the rate of the last couple of years of his party's administration.
One of the reasons for that we debated in Committee. I hesitate to repeat it, but I shall be brief. The truth is that there has never been any basic eschewing of subsidies by the Conservatives. There has been something of this basic rejection at least in recent years by the Liberal Party, though not actually in earlier years, but there has been no such approach by the Conservatives. Their figures for subsidy ran at the high level of about £800 million in the last full year of their administration. Some £500 million went to nationalised industries, about £300 million to private industry— I can now see that my original figure was incorrect— and £112 million on milk, and the same on butter. That is just short of £l.000 million in subsidies of one kind or another.
The only difference between the Conservatives and ourselves was that they preferred to subsidise nationalised industries and private companies to a greater extent and food to a less extent. It will therefore not do to pretend that we are here having a debate on principle— a principle which my party has never worried about accepting. The debate is about the choice of subsidy, not about the principle of subsidy.
The Opposition have reiterated that we should phase out subsidies, and they keep talking as though this is something new, a kind of revelation today. I stand by what I have said repeatedly, that the Government are committed to a phasing out, but a very gradual phasing out. Opposition Amendment No. I would leave a total figure of subsidies of £1.000 million. The


second amendment would rule out any extension of the ceiling to £1,700 million which is implicit in subsection (3). That would have a simple effect. Expenditure this year is estimated at £550 million in money terms—in real terms the figure will be slightly below last year's £516 million, which is about £488 million in real terms. The Opposition would then say that last year's £516 million and this year's £550 million would exceed the limit and therefore the subsidies would be chopped. Alternatively, the Government could go back to the trade and tell it to halve the present subsidies, but the trade would not like that.
The hon. Member for Gloucester said she had consulted the Food and Drink Industries Council and it had suggested a phasing of three years, but the Opposition must be quite clear what they are proposing. If the amendments were made the phasing would be over one year. It would be quite impossible for the trade to adapt to that because half the outstanding amount has already been spent in the figures we have been using here, so that there would be only about another £500 million to come. We have had no representations for such a rapidly accelerating phasing out from the trade, though we have had rather different representations. Perhaps I may quote two of them.
The Milk Marketing Board's consumers' committee for England and Wales, which is concerned with the underlying source of the food which encompasses three of the subsidised products— butter, cheese and milk itself— and the largest part of the food subsidy programme, said in its report on 12th February :
The Chairman of the Milk Marketing Board has expressed the hope, and so have the Dairy Trade Federation "—
which I believe to be a significant part of the food manufacturing and food producing sector—
 that when the time comes to remove these subsidies the process will be a gradual one to avoid violent changes in consumption and to give the industry time to adapt its policies and resources to new market conditions. On behalf of the consumer, where the household budget would be affected by any marked rise in the price of milk, we endorse this hope.

In paragraph 80 the report repeats the same advice in respect of butter and cheese.
The official representations made to us, therefore, by the Food and Drink Industries Council do not align with the Opposition amendment, which would require on any possible basis a catastrophically rapid rate of rundown.

Mr. Neubert: Is the Minister going to tell us her timetable for phasing out food subsidies? The only indication so far is contained in the Public Expenditure White Paper, which makes it clear that it will be 1984 before they run down and out.

Mrs. Williams: The Public Expenditure White Paper indicates figures for four to five years. It does not indicate what lies beyond that, and the hon. Member for Oswestry will only too readily say, if I do not, that it would be extremely foolish for any administration to predict what will happen in six, seven or eight years' time. So it is our intention to phase subsidies out gradually, though I cannot say exactly when. The House knows perfectly well that the power is in its hands. In the spring of 1976, if I am to go up to the ceiling of £1,700 million which is implicit in the Bill, I shall have to return to the House for an affirmative order. Anything beyond that would require a complete new Bill.
In my Department we have consistently put ourselves in the position of having to return to the House repeatedly for further legislative authority to continue. Throughout the Committee proceedings and on Second and Third Readings of the original Prices Bill no suggestion was made to the effect that the Bill would not be extended. Indeed, it was implicit in our debates that it was bound to be extended.

Mr. Biffen: The right hon. Lady has repeated the welcome news of her intention to phase out these subsidies. Although there may be some dispute about the pace of the phasing, may we assume that the right hon. Lady does not accept the advice contained in the Trades Union Congress Economic Review that food subsidies should now be increased?

Mrs. Williams: I think that it would be unwise to say whether I do or do not accept that fadvice. As I have made clear repeatedly in the House, the purpose of the subsidies is to try to offset the effects of inflation. At the moment we are working on the basis of there being a mild fall in commodity prices. I cannot predict what would happen if that course were to change rapidly. The hon. Member for Oswestry will have to await the decisions announced in the Budget. Of course, the TUC is not proposing a figure over a certain period which would make a sharp difference to the general intention of a gradual phasing out.
I must say to the House— if I do not do so it will reach a false conclusion— that when I talk about a gradual phasing out of food subsidies I am in no way suggesting that there is nothing effective to be done as regards the redistribution of pricing policies. I have the greatest sympathy with the remarks which have been made on that subject by a number of my hon. Friends. We have often subsidised those elements in prices which are least likely to benefit the less well off.
My hon. Friend the Member for Cannock mentioned the subsidy proposed by the right hon. Member for Finchley (Mrs. Thatcher) during the last election. The right hon. Lady proposed to increase extensively the subsidy given to owner-occupiers. There are many other examples.
In Committee I gave the example of the way in which some of the subsidies of nationalised industry prices are being phased out by the present administration. Those subsidies were of much greater benefit to the better-off sections of the community than to the less well-off. In that respect they do not compare favourably with food subsidies. That is because of the proportion of expenditure by the poor on food. The opposite is the case for the straight forward reason that in the past year the index for pensioners, the only poor group for whom we have complete statistical indices, has for the first time in five years increased less rapidly than the index for the general community.
It can also be said that the index for food has for the first time in a number of years increased less rapidly than the RPI

generally. That by itself would be a sufficient reason for the corpse still being alive and walking and very far from its coffin. I say that in answer to the hon. Member for Colne Valley (Mr. Wainwright).
In anything I may say about the gradual phasing out of food subsidies in the interests of other sorts of benefit I want to make it crystal clear that one of the functions of my Department is to ensure that what I can describe only as regressive pricing policies cease to be regressive. One of the things that I have learnt in my year in this office is that it is not only in incomes where there is a considerable gap between rich and poor. That gap also exists in pricing policies.
We encounter the gap when we compare the interest rates that the poor pay to obtain credit against the interest rates that those with substantial security have to pay. Whether it is the subsidies to the large consumers of power as against the subsidies to the small consumers of power, whether it is the steady increase in the price of necessities as against the price of less essential goods, with services going up in price less rapidly than the essentials of energy and food, or whether it is in housing, where very often in the past those who had the largest mortgage gained the most from taxation, when we consider pricing policies in the same light as incomes policies it is clear that so often the poor are penalised. Any phasing out of food subsidies that takes place will take place in the light of a move towards changing the policies that I have mentioned so that they are no longer regressive in the way that they have been for so long.

7.15 p.m.

Mr. Norman Lamont (Kingston-upon-Thames): This has been a useful debate. It has demonstrated, if it needed further demonstration, precisely how limited are food subsidies in their usefulness as a means of fighting inflation.
Perhaps it is unfair to judge by the results, but the events of the past year have shown conclusively that food subsidies are not a magic wand that can be waved to defeat the forces of inflation. The Secretary of State may tell us about the different movements of the retail price index, the food price index or the pensioners' index ; and she may describe the


way in which all the different indices move at the same time, but whatever the difference between those indices, that pales into insignificance when we recall the increase in inflation that has taken place in the last year.
The different indices pale into insignificance when we remember that the year-on rate of inflation is 20 per cent. compared with the rate of 13 per cent. when the right hon. Lady came to power. Let us remember that the one-month figure for inflation on an annualised basis is now 35 per cent. What use, in that situation, is ½ p per person on the tea subsidy or ip per person on the flour subsidy? All that is very small beer compared with the tremendous acceleration of prices generally.
I remember once participating in a debate on social security, when one benefit had been increased by 10p. The right hon. Member for Blackburn (Mrs. Castle), the present Secretary of State for Social Services, scoffed at 10p. She said that she would not bother to bend down in the street to pick it up. I wonder what her invective would be about the sort of sums we are talking about now.
How very different, too, is the reality of inflation compared with what we were told by the Chancellor in his best 8·4 per cent. accent. It is unfair to contrast the hours of courtship with the years of possession, but the British people will not forget. We, too, cannot forget precisely what the Chancellor told us during the last election. One of his utterances which has received rather less publicity than others was the statement he made during the election, that as from next Easter there would be a steady and continuous fall in prices.
Well, I am a generous man. Leaving aside the phrase "a fall in prices ", by which I think he probably meant a fall in the rate of inflation, the Chancellor has three weeks in which to show that his prediction will come right. There is precious little evidence of that forecast even moving in the right direction. How very different were the remarks quoted in the Press recently by the hon. Member for Birmingham, Ladywood (Mr. Walden). He said that in every month of this Government the rate of inflation has not merely risen but accelerated. [Interruption.] The right hon. Lady says that is not true, but it was what the hon. Gentle-

man said. That is what he chose to contrast with the Chancellor's remarks. Perhaps the Secretary of State will care to take up the matter with her hon. Friend.
I like to be fair to the Government. There have been some forecasts and some speculation as to whether the rate of inflation may not reduce a little in the second half of this year. Let us make no mistake about it, if the rate of inflation decelerates in the second half of the year that will not be because of the social contract or because of subsidies but because of the recession and the level of unemployment.
The Chancellor has talked of not using unemployment as a means of combating inflation and he has attacked the self-confessed monetarists on the Opposition benches. He talks soft and acts hard. I do not criticise the Chancellor for the action he is taking, but I do criticise those who believe him when he says that he is not using unemployment as a weapon, and I criticise the way in which he says one thing and does another.
If we jog backwards we recall that the original aim of subsidies was to persuade the trade union movement to moderate its wage demands. That manifestly has not happened in the last year. It is clear beyond a shadow of doubt that wages and earnings have outstripped the rise in prices. Prices in the last year have gone up by the staggering amount of 20 per cent. and wages have gone up by 30 per cent. Even on last month's figure, when prices are shown on an annualised basis to be going up by 35 per cent., wages went up by the skyscraping figure of 56 per cent. What a contrast with the situation in the United States, where prices are going up by 11 per cent. and wages by 9 per cent.
The astonishing thing surely is not that subsidies have not succeeded in persuading trade unions to moderate their wage demands but that anyone should ever have believed that they were likely to do so.
Another original objective of subsidies was to minimise the impact of the rise in raw material prices, but now the rise in wages has taken over as the main cause of inflation and the Government are using subsidies to pay wage increases, which is precisely the situation which subsidies were introduced to avoid.
Furthermore, for all the money that is being poured out in food subsidies— nearly £600 million a year— food prices are still rising. The prices of milk, butter, cheese. bread, sugar, sausages, bacon and pork are all going up, or have gone up.
All this massaging of the retail price index is totally irrelevant to real problem of inflation. Manipulating the retail price index does not counter inflation ; all it does is to suppress the symptoms of inflation. My hon. Friend the Member for Malden (Mr. Wakeham) argued well that although subsidies may temporarily reduce the appearance of inflation and suppress inflation they give only a temporary alleviation. One soon moves into the period when costs go up again and a decision has to be taken whether to let the costs work through or to provide more money for subsidies to peg prices at their existing level. One simply goes on deferring the evil day when the taxpayer and the consumer have to face reality.
In politics there is an old adage that when one is in difficulty one changes one's ground. Now we are told that subsidies are part of the great process of the redistribution of income and wealth. That is a blanket phrase which, like all blankets, is used to conceal a multitude of sins.
I reiterate what my hon. Friend the Member for Pudsey (Mr. Shaw) said— that food subsidise are like buckshot ; a lot misses the target. Food subsidies are a highly inefficient way of helping the poor as well as being an extremely costly one. We know that 50 per cent. of the subsidies go to households with incomes of more than £50 a week. I have no doubt that property developers, merchant bankers, Japanese tourists and Arab business men who sample Délices des Dieux on the cheese board at the newly reopened French "Caprice" restaurant are grateful for the difference which the introduction of food subsidies has made to their living standards. Perhaps when they pore over the cheese board at the "Caprice" they remember the words of the Chancellor on the radio when he said that subsidising bread helps the millionaire if he eats some bread, but if he feels guilty about it he can always send a donation. Perhaps it is not the millionaire in the "Caprice" who should feel guilty about

it. Perhaps those who should feel guilty are the politicians who connive at and accept such a scandalous misuse of public funds.
The Secretary of State will no doubt think that I am being extremely selective in naming the beneficiaries of food subsidies. She would probably choose to mention pensioners, nurses, large families and low-wage earners, some of whom, no doubt, are getting tired of being mentioned in every bogus piece of social justice which she chooses to trot out. Her list is just as selective as the one I quoted, because the reality is that 52 per cent. of the population get 50 per cent. of the benefit of food subsidies.
From the article by Professor Ritson of Reading University, which featured in our debates in Committee, we know how the benefits of food subsidies break down between various income groups. He said that those who earned less than £23 a week are net beneficiaries, but he also said that those who earned between £23 and £41 a week receive over £200 million in food subsidies and pay only £100 million, and that those who earn between £41 and £70 a week receive £240 million in food subsidies and pay only £140 million. 1 do not believe that in the debates on the Bill the Secretary of State has made a convincing case on the redistributive justice of food subsidies.
We are sometimes told that food subsidies redistribute between those with families and those without families. That is undoubtedly true, and it might be a compelling argument if food subsidies were not being financed out of indirect taxation, as the Chancellor in his Budget speech specifically said they were. That is why food subsidies are nothing more than a pious fraud. They are financed to a large extent out of levies on beer, tobacco and other commodities that are paid for out of the income of those who are meant to be the beneficiaries of food subsidies.

Mr. Shirley Williams: If everything the hon. Gentleman says is true, why did the Conservative Party advocate the retention of food subsidies during the last election campaign?

Mr. Lamont: What we made cleat during the last election and what is made clear in our amendment today is that we


think that food subsidies, as they exist, should not be abolished overnight but should be phased out. That is the argument which was developed with such conviction and skill by my hon. Friend the Member for Gloucester (Mrs. Oppenheim).
The argument has been put forward that food subsidies are of great benefit because there is a 100 per cent. take-up, as there is not for social service benefits. That argument is supposed to make the case for food subsidies overwhelming. But there are social security benefits that are not means-tested. There are methods of improving the take-up of benefits. If that is the crux of the Government's argument, it is a great pity that they chose to ditch the tax credit scheme, by which they could have given direct help to the people who are most in need.
I come now to the argument that food subsidies are important because the lower-paid spend a larger proportion of their income on food. There is force in that argument, but it is in danger of being overstated. As Professor Ritson pointed out in his article in New Society, what is remarkable in this country is how little expenditure on food varies between different income groups. He said that in the last six months of 1974 the lowest 10 per cent. of the lowest income group consumed only 10 per cent. less meat than did the average of all householders. Even if there are differences between low income families and average families, it is not true to the same extent of pensioner households. Therefore, that is not a convincing argument.
Apart from the feeblesness of the argument put forward by Labour Members in justification of the subsidy policy, there are two weighty, and in our opinion, serious, reasons why subsidies must be phased out— and phased out more quickly that is at present envisaged. One reason was mentioned by my hon. Friend the Member for Oswestry (Mr. Biffen)— the heavy burden of public expenditure and the borrowing requirement in this country. Leaving aside all questions of seeking to find other ways in which the additional money could be spent— for example, in welfare benefits— there is a need to reduce public expenditure. There is a compelling case on that ground.
At present the Government borrowing requirement is at least £6,000 million,

and some people believe that it amounts to £8,000 million. That would mean £450 for every household. There is the strongest suspicion that the control of Government expenditure is totally nonexistent. The poor Chief Secretary has done his best but has produced a White Paper in which public expenditure goes ever upwards but in which there is no room for private consumption. Labour Members do not seem to care about the public expenditure problem. They get excited about a contribution to the European budget of £120 million but when two and a half times that amount is spent on the milk subsidy, and 10 times that amount on food subsidies as a whole, they do not seem to turn a hair.
As my hon. Friend the Member for Eastbourne (Mr. Gow) said, the Government, because of their borrowing requirement. are in a most precarious situation. They want to phase out food subsidies, but the question is whether our creditors and the sheikhs will be able to wait that long. We believe that there is a strong case for moving faster than the Government envisage.
The second objection to food subsidies was embodied in the excellent speeches by my hon. Friends the Members for Pudsey (Mr. Shaw) and Romford (Mr. Neubert), and lies in the distortions caused by subsidies. These distortions lead to increases in consumption, effects on the balance of payments, like the rocketing imports of butter, and effects on production which can exacerbate shortages.
In certain cases, one may find that food subsidies will prevent some price reductions. Many major retailers in the past have been able to negotiate discounts with bakers of up to 28 per cent., but the Secretary of State takes the view that it is not right that the subsidised firms should profit in that way. Therefore, the discount has been limited to a maximum of 22½ per cent. with the result that we have had higher bread prices.
There are also the effects of the butter subsidy on margarine producers and the distorting effects in that respect. We must also consider the distorting effects of bread subsidy and the extent which it has shifted consumption from some types of bread that are not subsidised to others that are subsidised.
My hon. Friend the Member for Pudsey also referred to the milk subsidy. The right hon. Lady tried to deal with that point in Committee. She said that milk consumption had increased only a little since the subsidy was introduced. That may be so, but a small increase in total liquid milk consumption may be important for the much smaller market which uses milk for manufacturing purposes. People engaged in making manufactured products are gravely concerned about the increase in consumption caused by the milk subsidies. We believe that the case for phasing out the subsidies more rapidly than the Government envisage is a strong one. They are putting the country in a difficult precarious financial situation.

The Government have got themselves impaled on a hook. The Secretary of State is beginning to see the logic of events. She is beginning to realise that subsidies are not a good idea. I appeal to the Secretary of State— as I understand, from the Crossman diaries, Lord Gardiner appealed to a Cabinet subcommittee— is it impossible to drop an idea which has been found to be impracticable, or must it continue simply because it appears in the Labour Party manifesto? That is one reason we believe this nonsensical idea should be scaled down much more rapidly.

Question put, That the amendment be made:—

The House divided : Ayes 99, Noes, 134.

Division No. 142.]
AYES
[7.35 p.m.


Arnold, Tom
Howell, David (Guildford)
Penhaligon, David


Atkins, Rt Hon H. (Spelthorne)
Howells, Geraint (Cardigan)
Powell, Rt Hon J. Enoch


Bennett, Sir Frederic (Torbay)
Hutchison, Michael Clark
Prior, Rt Hon James


Benyon,W.
James, David
Rathbone, Tim


Berry, Hon Anthony
Jessel, Toby
Rees-Davies, W. R.


Body, Richard
Kilfedder, James
Renton, Tim (Mid-Sussex)


Boscawen, Hon. Robert
King, Evelyn (South Dorset)
Roberts, Michael (Cardiff NW)


Braine, Sir Bernard
Knight, Mrs Jill
Ross, Stephen (Isle of Wight)


Brittan, Leon
Knox, David
Sainsbury, Tim


Brotherton, Michael
Lamont, Norman
Shaw, Giles (Pudsey)


Buchanan-Smith, Allick
Lane, David
Shepherd, Colin


Budgen, Nick
Lawrence, Ivan
Shersby, Michael


Clark, Alan (Plymouth, Sutton)
Le Marchant, Spencer
Sims, Roger


Clarke, Kenneth (Rushcliffe)
Luce, Richard
Smith, Cyril (Rochdale)


Cooke, Robert (Bristol W)
Macmillan, Rt Hon M. (Farnham)
Speed, Keith


Cope, John
Mates, Michael
Stainton, Keith


Crowder. F. P.
Mather, Carol
Stanley, John


Dean, Paul (N Somerset)
Mayhew, Patrick
Steel, David (Roxburgh)


Douglas-Hamilton, Lord James
Meyer, Sir Anthony
Stokes, John


Dunlop, John
Miller, Hal (Bromsgrove)
Stradling Thomas, J.


Emery, Peter
Mills, Peter
Taylor, Teddy (Cathcart)


Fisher, Sir Nigel
Miscampbell, Norman
Tebbit, Norman


Fletcher-Cooke, Charles
Moate, Roger
Thomas, Rt Hon P. (Hendon S)


Fookes, Miss Janet
Molyneaux, James
Townsend, Cyril D.


Fowler, Norman (Sutton C'f'd)
Montgomery, Fergus
Walnwright, Richard (Colne V)


Gilmour, Rt Hon Ian (Chesham)
Morrison, Charles (Devizes)
Wakeham, John


Gow, Ian (Eastbourne)
Morrison, Hon Peter (Chester)
Warren, Kenneth


Gray, Hamish
Neave, Airey
Weatherill, Bernard


Grimond, Rt Hon J.
Nelson, Anthony
Winterton, Nicholas


Grylls, Michael
Neubert, Michael
Young, Sir G. (Ealing, Acton)


Hamilton, Michael (Salisbury)
Newton, Tony



Hannam, John
Oppenheim, Mrs Sally
TELLERS FOR THE AYES:


Hawkins, Paul
Page, Rt Hon R. Graham (Crosby)
Mr. Fred Silvester and Mr. Russell Fairgrieve.


Hicks, Robert
Pardoe, John



Higgins, Terence L.






NOES


Allaun, Frank
Buchan, Norman
Dunn, James A.


Anderson, Donald
Campbell, Ian
Eadie, Alex


Armstrong, Ernest
Canavan, Dennis
Edge, Geoff


Atkinson, Norman
Cartwright, John
Ellis, John (Brigg &amp; Scun)


Bain, Mrs Margaret
Clemitson, Ivor
Ellis, Tom (Wrexham)


Barnett, Guy (Greenwich)
Cocks, Michael (Bristol S)
Evans, Gwynfor (Carmarthen)


Bates, Alf
Coleman, Donald
Evans, loan (Aberdare)


Bean, R. E
Colquhoun, Mrs Maureen
Evans, John (Newton)


Bishop, E. S.
Dalyell, Tarn
Ewing, Harry (Stirling)


Blenkinsop, Arthur
Deakins, Eric
Ewing, Mrs Winifred (Moray)


Boardman, H.
Dempsey, James
Faulds, Andrew


Boothroyd, Miss Betty
Doig, Peter
Fernyhough, Rt Hon E.


Brown, Hugh D. (Provan)
Dormand, J. D.
Fitch, Alan (Wigan)


Brown, Robert C. (Newcastle W)
Duffy, A. E. P.
George. Bruce




Gould, Bryan
Marquand, David
Silverman, Julius


Gourlay, Harry
Marshall, Dr Edmund (Goole)
Skinner, Dennis


Graham, Ted
Mellish, Rt Hon Robert
Small, William


Grant, George (Morpeth)
Mlllan, Bruce
Smith, John (N Lanarkshire)


Grocott, Bruce
Miller, Dr M. S. (E Kilbride)
Spriggs, Leslie


Hamilton, W. W. (Central File)
Miller, Mrs Millie (llford N)
Stewart, Rt Hon M. (Fulham)


Harper, Joseph
Mitchell, R. C. (Soton, Itchen)
Swain, Thomas


Harrison, Walter (Wakefield)
Morris, Charles R. (Openshaw)
Taylor, Mrs Ann (Bolton W)


Hatton, Frank
Moyle, Roland
Thomas, Dafydd (Merioneth)


Hayman, Mrs Helena
Murray, Rt Hon Ronald King
Thomas, Ron (Bristol NW)


Henderson, Douglas
Newens, Stanley
Thompson, George


Hunter, Adam
Noble, Mike
Thorne, Stan (Preston South)


Jackson, Miss Margaret (Lincoln)
O'Halloran, Michael
Tinn, James


Janner, Grevllle
O'Malley, Rt Hon Brian
Torney, Tom


Jones, Alec (Rhondda)
Orme, Rt Hon Stanley
Urwin, T. W.


Jones, Dan (Burnley)
Ovenden, John
Wainwright, Edwin (Dearne V)


Kerr, Russell
Palmer, Arthur
Walker, Terry (Kingswood)


Kilroy-Silk, Robert
Park, George
Weetch, Ken


Lamborn, Harry
Pavitt, Laurie
Weitzman, David


Leadbitter, Ted
Peart, Rt Hon Fred
Welsh, Andrew


Lewis, Ron (Carlisle)
Pendry, Tom
White, Frank R. (Bury)


Loyden, Eddie
Perry, Ernest
White, James (Pollok)


Lyons, Edward (Bradford W)
Phipps, Dr Colin
Williams, Alan (Swansea W)


McElhone, Frank
Prescott, John
Williams, Rt Hon Shirley (Hertford)


Mackenzie, Gregor
Reld, George
Wilson, Alexander (Hamilton)


Maclennan, Robert
Roderick, Caerwyn
Wise, Mrs Audrey


McMillan, Tom (Glasgow C)
Rodgers, George (Chorley)
Woodall, Alec


McNamara, Kevin
Rooker, J. W.
Young, David (Bolton E)


Madden, Max
Roper, John



Magee Bryan
Rose, Paul B.
TELLERS FOR THE NOES


Magulre, Frank (Fermanagh)
Sheldon, Robert (Astiton-u-Lyne)
Mr. James Hamilton and Mr. David Stoddard 


Marks, Kenneth
Short, Mrs Renee (Wolv NE)

Question accordingly negatived.

Amendment proposed : No. 2, in page 2, line 21, leave out subsection (3).— [Mrs. Sally Oppenheim.]

Question put, That the amendment be made :—

The House divided : Ayes 98, Noes 133.

Division No. 143.]
AYES
7.47 p.m.


Arnold, Tom
Hawkins, Paul
Pardoe, John


Atkins, Rt Hon H. (Spelthorne)
Hicks, Robert
Penhaligon, David


Bennett, Sir Frederic (Torbay)
Higglns, Terence L.
Powell, Rt Hon J. Enoch


Benyon, W.
Howell, David (Guildford)
Prior, Rt Hon James


Berry, Hon Anthony
Howells, Gereint (Cardigan)
Rathbone, Tim


Body, Richard
Hutchison, Michael Clark
Rees-Davies, W. R.


Boscawen, Hon. Robert
James, David
Renton, Tim (Mid-Sussex)


Bralne, Sir Bernard
Jessel, Toby
Roberts, Michael (Cardiff NW)


Brittan, Leon
Kllfedder, James
Ross, Stephen (Isle of Wight)


Brotherton, Michael
King, Evelyn (South Dorset)
Sainsbury, Tim


Buchanan-Smith, Allck
Knight, Mrs Jill
Shaw, Giles (Pudsey)


Buck, Antony
Knox, David
Shepherd, Colin


Budgen, Nick
Lamont, Norman
Sims, Roger


Clark, Alan (Plymouth, Sutton)
Lane, David
Smith, Cyril (Rochdale)


Clarke, Kenneth (Rushcliffe)
Lawrence, Ivan
Speed, Keilh


Cooke, Robert (Bristol W)
Luce, Richard
Stalnton, Keith


Cope, John
Macmlllan, Rt Hon M. (Farnham)
Stanley, John


Crowder, F. P.
Mates, Michael
Steel, David (Roxburgh)


Dean, Paul (N Somerset)
Mather, Carol
Stokes, John


Douglas-Hamilton, Lord James
Mayhew, Patrick
Stradling Thomas, J.


Dunlop, John
Miller, Hal (Bromsgrove)
Taylor, Teddy (Cathcarl)


Emery, Peter
Mills, Peter
Tebblt, Norman


Falrgrieve, Russell
Mlscampbell, Norman
Thomas, Rt Hon P. (Hendon S)


Fisher, Sir Nigel
Moate, Roger
Townsend, Cyril D.


Fletcher-Cooke, Charles
Molyneaux, James
Wainwright, Richard (Colne V)


Fookes, Miss Janet
Montgomery, Fergus
Wakeham, John


Fowler, Norman (Sutton C'f'd)
Morrison, Charles (Devizes)
Warren, Kenneth


Gilmour, Rt Hon Ian (Chesham)
Morrison, Hon Peter (Chester)
Weatherill, Bernard


Gow, Ian (Eastbourne)
Neave, Alrey
Wlnterton, Nicholas


Gray, Hamlsh
Nelson, Anthony
Young, Sir G. (Ealing, Acton)


Grlmond, Rt Hon J.
Neubert, Michael



Giylls, Michael
Newton, Tony
TELLERS FOR THE AYFS


Hamilton, Michael (Salisbury)
Oppenhelm, Mrs Sally
Mr. Spencer Le Marchant and Mr. Fred Silvester.


Hannam, John
Page, Rt Hon R. Graham (Crosby)





NOES


Allaun, Frank
Bean, R. E.
Buchan, Norman


Anderson, Donald
Bishop, E. S.
Campbell, Ian


Armstrong, Ernest
Blenkinsop, Arthur
Canavan, Dennis


Atkinson, Norman
Boardman, H.
Cartwright, John


Bain, Mrs Margaret
Boothroyd, Miss Betty
Clemitson, Ivor


Barnett, Guy (Greenwich)
Brown, Hugh D. (Provan)
Cocks, Michael (Bristol S)


Bates, Alf
Brown, Robert C. (Newcastle W)
Coleman, Donald




Colquhoun, Mrs Maureen
Lewis, Ron (Carlisle)
Roper, John


Dalyell, Tam
Loyden, Eddie
Rose, Paul B.


Deakins, Eric
Lyons, Edward (Bradford W)
Sheldon, Robert (Ashton-u-Lyne)


Dempsey, James
McElhone, Frank
Short, Mrs Renee (Wolv NE)


Doig, Peier
Mackenzie, Gregor
Silverman, Julius


Dormand, J. D.
Maclennan, Robert
Skinner, Dennis


Duffy, A. E. P.
McMillan, Tom (Glasgow C)
Small, William


Dunn, James A.
McNamara, Kevin
Smith, John (N Lanarkshire)


Eadie, Alex
Madden, Max
Spriggs, Leslie


Edge, Geoff
Magee. Bryan
Stewart, Rt Hon M. (Fulham)


Evans, Gwynfor (Carmarthen)
Maguire, Frank (Fermanagh)
Stoddart, David


Evans, loan (Aberdare)
Marks, Kenneth
Swain, Thomas


Evans, John (Newton)
Marshall, Dr Edmund (Goole)
Taylor, Mrs Ann (Bolton W)


Ewing, Harry (Stirling)
Mellish, Rt Hon Robert
Thomas, Dafydd (Merioneth)


Ewing, Mrs Winifred (Moray)
Millan, Bruce
Thomas, Ron (Bristol NW)


Faulds, Andrew
Miller, Dr M. S. (E Kilbride)
Thompson, George


Fernyhough, Rt Hon E
Miller, Mrs Millie (llford N)
Thome, Stan (Preston Soutn)


Fitch, Alan (Wigan)
Mitchell, R. C. (Soton, Itchen)
Tinn, James


George, Bruce
Morris, Charles R. (Openshaw)
Torney, Tom


Gould, Bryan
Moyle, Roland
Urwin, T. W.


Gourlay, Harry
Murray, Rt Hon Ronald King
Wainwrignt Edwin (Dearne V)


Graham, Ted
Newens, Stanley
Walker, Terry (Kingswood)


Grant, George (Morpeth)
Noble, Mike
Weetch, Ken


Grocott, Bruce
O'Halloran, Michael
Weltzman, David


Hamilton, James (Bothwell)
O'Malley, Rt Hon Brian
Welsh, Andrew


Hamilton, W W. (Central Fife)
Orme, Rt Hon Stanley
White, Frank R. (Bury)


Harper, Joseph
Ovenden, John
White, James (Pollok)


Harrison, Walter (Wakefield)
Palmer, Arthur
Williams, Alan (Swansea W)


Hatton, Frank
Park, George
Williams, Rt Hon Shirley (Hertford)


Hayman, Mrs Helene
Pavitt, Laurie
Williams, W. T. (Warrington)


Henderson, Douglas
Peart, Rt Hon Fred
Wilson, Alexander (Hamilton)


Hunter, Adam
Pendry, Tom
Wise, Mrs Audrey


Janner, GreviHe
Perry, Ernest
Woodall, Alec


Jones, Alec (Rhondda)
Phipps, Dr Colin
Young, David (Bolton E)


Jones, Dan (Burnley)
Prescott, John



Kerr, Russell
Reid, George
TELLERS FOR THE NOES:


Kilroy-Silk, Robert
Roderick, Caerwyn
Miss Margaret Jackson and Mr. John Ellis.


Lamborn, Harry
Rodgers, George (Chorley)



Leadbitter, Ted
Rooker, J. W.

Question accordingly negatived.

Motion made, and Question, That the Bill be now read the Third time, put forthwith, pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

Orders of the Day — SOCIAL SECURITY BENEFITS BILL

Lords amendments considered.

Clause 1

Orders of the Day — RATES OF BASIC SCHEME BENEFITS

Lords amendment : No. 1, in page 2, line 17, leave out from "substituted" to "paragraphs" in line 23 and insert "" £20 "and at the end there shall be inserted:
 With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, this subsection shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—


1976
"£"


1977
"£" "


(4) In'".

7.58 p.m.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): I beg to move, That this House does agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Oscar Murton): I understand that it will be for the convenience of the House to discuss at the same time Lords Amendment No. 3.

Mr. O'Malley: These amendments deal with the vexed subject of the earnings rule on which we have had vigorous and controversial debates in recent weeks. I think that this evening we may have reached tranquillity, because I cannot believe that the Opposition would be able so to contort themselves as to do anything but agree with the recommendation that we should accept the amendment made in another place.
The amendment puts into proper form the relaxation of the earnings rule which was agreed to when the Bill was reported back to the House from Standing Committee. It clarifies the wording of subsection (3). We are doing nothing new. All that we are doing is to put into proper legal form the intention of the


House expressed in the vote some weeks ago. I understand the difficulty of drafting amendments in proper legal language. There were serious defects in the drafting of the amendment which was made then.

8.0 p.m.

The Government do not propose to reopen the argument about whether the changes proposed, and now embodied in the Bill, are justifiable in present economic circumstances. The Bill, as amended, will achieve the objectives of the original amendment. The earnings limit below which retirement pensions are not affected will be increased from £13 to £20 from April this year ; to £35 from April 1976 ; and to £50 from April 1977. That was clearly the wish of the House. I ask the House, in making a judgment on that statement, to look back at the Divisions when we last considered the subject.

When the Bill went to the other place it referred to the earnings limit being changed
in the year following the coming into force of the said Act of 1973"— 
the Social Security Act. But there is no single date on which that Act comes into force. The important contribution provisions of the Act will come into force next month, but other provisions have been in force since various dates from July 1973. The Bill, as amended in the other place, leaves no room for doubt about when the various phases of relaxation of the earnings rule should come into operation.

Another important consideration is that the Bill would have left a void after the £50 earnings limit had operated for one year. Some hon. Members might say that that is the situation they wish, although the House decisively rejected an amendment which would have had the effect of bringing the earnings rule to an end even in the year 1980.

It is relevant to consider the reservations expressed by the hon. Member for Wells (Mr. Boscawen) in Standing Committee, where he frankly recognised the economic and financial difficulties of the country. He believes, as I believe, that there is a case to be made for a progressive relaxation of the earnings rule as financial resources become available, but at no time did the Opposition Front Bench take the view that it would be

economically desirable to abolish the earnings rule completely as from 1978.

It was clearly not the intention of the House that there should be a void. It would have led to odd consequences and disadvantages for prospective pensioners. I said in Committee more than once that the retirement condition and the earnings rule ran hand in hand, and that if the earnings rule were removed the retirement condition would automatically need removal as well.

If hon. Members did not accept the amendment made in another place, there would be odd consequences which they may not have had the opportunity to consider. Those consequences arise largely because the amendment derives from the drafting of the existing legislation. If there were no earnings limit, it would no longer be possible for a person to be treated as retired if his future earnings were expected to be below the amount of that limit, as happens now. Instead, he would have to satisfy the remaining parts of the retirement condition and show that the work he intended to do would be only "occasional "or
 inconsiderable in extent 
or
otherwise not inconsistent with retirement 
That would bear most hardly on the low earner. It would be particularly inequitable at a time when existing pensioners were being completely freed from any earnings limit.

The Bill, as amended, will allow the £50 earnings limit to continue after its introduction in April 1977 until amended under the regulation-making powers which already exist. But, for technical reasons, these powers could not be used to provide for an earnings limit if none already existed.

The power conferred by the amendment which we moved in the other place, to prescribe a day in a particular week— the first week of the income tax year— from which the second and third stages of the relaxation of the earnings rule are to be brought in, will simply enable us to get over the technical difficulties, arising out of the pay days that there are for different benefits, which might otherwise have prevented the relaxation from reaching all the beneficiaries concerned in the same week.

On the first occasion, in April of this year, there are obvious reasons for ensuring, as the amendment does, that the relaxed rule will start to operate at the same time as the increased rates provided by the Bill will become payable— that is, from the beginning of the next financial year. That is clearly what hon. Members had in mind when the Bill was before us earlier.

The amendment with which I am asking the House to concur thus tidies up subsection (3) and removes the ambiguities which were in the Bill when it left us. Therefore, I hope that the amendment will commend itself to the House.

Amendment No. 3 is beneficial. It extends to wives residing with industrial injuries disablement pensioners who are entitled to unemployability supplement the relaxed earnings rule which is provided under subsection (3) of Clause 1 for the wives of retirement and invalidity pensioners.

It is desirable that the wives of unemployability supplement beneficiaries under the industrial injuries scheme should continue to be treated in the same way as the wives of invalidity pensioners under the national insurance scheme.

Mr. Kenneth Clarke: The amendments arise, as the Minister said, from the proceedings in the House a short time ago when the Government suffered a notable defeat on the earnings rule. The consequence was a worthwhile relaxation in the earnings rule for retirement pensioners and the wives of invalidity pensioners.
One of the things which the Government are now doing, which we welcome, is to put right an oversight in the previous proceedings, by extending the relaxation to the wives of industrial injuries disablement pensioners who are entitled to unemployability supplement.
I accept that it is the Government's intention in Amendment No. 1 to tidy up the wording of the amendment drafted by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), which was carried against the Government. Lord Wells-Pestell said on behalf of the Government in the other place:
 I want to make it perfectly clear…that this Amendment is not designed in any way to

reverse or to modify the clear intention of those who supported the relaxation."— [Official Report, House of Lords, 27th February 1975 Vol. 357, c. 998.]
I accept the Government's good faith in that they were trying to tidy up the drafting to give effect to what they believed the House intended. Unlike, for instance, the other defeat which they suffered on the question of disabled housewives, they are trying to go back on the decision of this House and in practice avoid the consequences of the defeat they suffered on that occasion. It was the genuine belief of Lord Wells-Pestell that he was simply meeting the case of what had been carried in this House.
There is certainly no need for me to go over the general case for the relaxation of the earnings rule. It was accepted in the House on a previous occasion that it was a very much resented and unfair rule in the way in which it bore on retirement pensioners and that a relaxation of it, moving towards virtual abolition, was a very important encouragement to retired people who want and need to keep themselves in some sort of worthwhile work.
However, I should like to look at the tidying up which is being carried out. because the Minister has made it clear— and the amendment makes it clear— that the amendment is designed to ease the rule to £50 a week by 1977. That, I accept, is what the House believed it had carried on the previous occasion. On that occasion we moved another amendment to abolish the earnings rule completely, which was defeated because the Labour Members who had supported the Opposition on the first Division did not support us on the second.
But what have we actually carried, and why is it that the Government are anxious to tidy up what was carried against them in the House? Lord Wells-Pestell drew attention to the most important unexpected consequence of what we had done when he said :
The technicality to which I referred at Second Reading was in relation to what was to happen after 1977. As the clause came from the other place "—
meaning this House—
 it would have meant that the earnings rule would have finished completely at that period.


The noble Lord spelled it out even more clearly when he said:
 As drafted, the Bill provides for no earnings limit once the £50 limit has been in operation for a year. The sponsors of the Amendment to the original Bill clearly did not intend the earnings rule to disappear in 1978 ; if they bad so intended, there would have been little point in their voting for the subsequent Amendment to abolish the earnings rule by 1980 or in their resisting the later Government Amendment at Report stage in another place to delete this provision from the Bill. Nevertheless, the Bill as it stands would mean that once the £50 had applied for a year there would be no figure by reference to which the earnings rule could operate. This would not only produce a result not intended when the provision was passed in another place, but would also have a very odd effect on the retirement condition."—[Official Report, House of Lords, 27th February 1975 ; Vol. 357, c. 997–9.]

8.15 p.m.

What emerges from that is this. One thing that we must concede— as I think my hon. Friend the Member for Kensington would concede— is that we did not realise that we had, in fact, abolished the earnings rule when we carried that amendment. Certainly the noble Lord who spoke for the Government and the Minister who has spoken today are quite correct. We did not realise the extent of the success that we had achieved, and we believed that it was necessary to go on to try to carry the second amendment. At that stage the Minister of State did not realise that what he had lost carried with it the consequences of the abolition of the earnings rule. But where the noble Lord and the Minister, if they tried to follow that line, would be wrong is in thinking that those of us on the Opposition side of the House who voted in both Divisions on that occasion intended to try to bring the earnings rule completely to an end.

It is our firm commitment to move towards total abolition of the rule. The Government's argument is that the votes on the previous occasion showed that this was not really the intention. Of course, it was the Labour Members who helped the Conservative Party to defeat the Government on the first amendment who did not vote in the second Division. They are not present now to say why they did not vote then. Possibly if they were present they might say that they decided to vote once against their Government on a three-line Whip and that that was enough for one evening. Perhaps recalling an occasion when dogs and

licences were referred to at a party meeting, they decided that they had better not push very much further. I suspect that many of them thought that by what they had carried they produced a consequence that by 1977 the Government would have to abolish the rule anyway and that they could not go any further.

However, the Government are coming back now realising that on the first occasion we had abolished the rule. Now they are trying to reduce what we achieved to a mere easing of the rule, which will be little in advance of inflation at the present rate in 1977.

We are taking this opportunity of demonstrating that we voted for both amendments on the previous occasion with the consequence of the abolition of the earnings rule. It was our intention to press upon the Government the abolition of the rule. It is the firm commitment of the Conservative Party to move towards the disappearance of the earnings rule from our retirement pension scheme. As the Minister will recall from our speeches in the prolonged debates, we accepted that as a consequence the retirement conditon had to go and we were moving towards a better old-age pension system.

The problems to which the Minister has referred, which would give some detailed difficulty in the abolition of the earnings rule if nothing more were done by 1978, could easily be put right by 1978 so that the earnings rule and the retirement rule could vanish together.

Mr. O'Malley: What change has taken place between the speech of the hon. Member for Wells (Mr. Boscawen) in Committee and the hon. Gentleman's speech on Report? What further change has taken place for the hon. Gentleman to undermine completely and dissent from his hon. Friend's remark? The hon. Member for Wells is on record as saying in Committee
 I could not recommend to my hon. Friends in the light of the exising economic circumstances that we go as far as Amendment No. 4 "— 
that is the amendment which was eventually carried—
 We cannot ignore the effect and the cost of what is involved, virtually straight away for the first £20 and again next year with the next £35."— [Official Report, Standing Committee B, 5th December 1974 ; c. 62.]


Now the hon. Gentleman is wanting to go even further. What has changed so that he is now completely dissenting from the remarks of his hon. Friend the Member for Wells and making him look very silly?

Mr. Clarke: Not at all. I am drawing the Minister into going back into the arguments that he used so unsuccessfully three or four weeks ago when he resisted this amendment. We debated those remarks then. They are taken from one portion of our Committee proceedings. It was then followed by a vote for the two amendments on the Floor of the House subsequently. The Minister will recall clearly the proceedings then, and that there was, indeed, a majority of the Committee who clearly disagreed with the Government. There was a period of delay and open discussion in the Committee before we agreed on which amendments we wanted to carry. But within half an hour of that remark being made, a clear majority of the Committee rejected the Minister's remarks about the amendments and carried both amendments. He was unable to use either that argument or any other to persuade the House to change its mind on Report. It is no good the Minister using the one debating point he had on the last occasion. He has lost that. The amendment shows the extent of what he has lost.
For our part, we are delighted to find how much we have achieved and we shall reinforce our commitment to move towards total abolition of the rule and not allow the Government to believe that they are getting away with a toning down to an easing of the rule in the coming years.
The Minister gave no indication about what the Government's intentions are. Never does he give any commitment about the abolition of the rule— except when it is hedged about with so many qualifications that it clearly comes within the dim and distant future. He is clearly trying to divert the House away from abolition and just to ease it to the lowest amount that he is able to carry in the House.
The Minister has referred to cost. We are about to attempt to reject this Lord's amendment because we prefer the consequences which flow from my hon. Friend's

amendment. Therefore, I shall deal with cost because otherwise, were we to be successful on this occasion, we would risk the Chancellor of the Exchequer charging in once more, leaping to his feet in the style of a bold and somewhat over-excited rhinoceros, and ranting to us about the figures involved and the enormity of what we have done— taking his defeat with the extremely bad grace and style he did on the last occasion.
In another place it has been stated that the figures involved are: for 1975–76 £45 million, 1976–77 £85 million, 1977–78 £110 million. Those are the Government's estimates. All that cost falls on the National Insurance Fund, which is grossly in surplus at present because of the graduated contributions from ever-inflating salaries and wages. Indeed, the Exchequer contribution from the Chancellor's own revenues to the cost of this is exceeded by the tax revenue he is likely to get back. There is, of course, a net cost to public funds even against the National Insurance Fund.
We challenged the Government on those figures in Committee and in debate on Report. When the Treasury Minister defended the figures he made a pathetic attempt to explain the background to them. He was unable to justify them to the full satisfaction of hon. Members on both sides of the House. Those figures rise to £110 million in 1978.
On the last occasion we discussed this matter—when the Chancellor got excited about the £110 million— the very next day the Government brought forward the Prices Bill authorising £1,000 million to be spent on indiscriminate food subsidies. By chance, we find ourselves following the Prices Bill today. It is absolute humbug for the Government to lecture us on priorities. Their expenditure is spendthrift and indiscriminate in some directions and fairly miserly in this direction. We do not regret what we did before and we shall do it again if we get the opportunity.
We wish to persuade the House to reject the Lords Amendment so that the Bill will remain as we carried it in this House a few weeks ago.

Mr. O'Malley: I should like to correct the hon. Gentleman on one point. He quoted the figures of £45 million, £85 million and £110 million as being the cost to the National Insurance Fund. I hope


he will accept that that is not the case and that he is incorrect. The figures he quoted are figures less tax, and the effect on the National Insurance Fund is shown by the higher figures of £60 million, £110 million and £145 million.

Mr. Clarke: The £110 million is the net cost in terms of public expenditure to the National Insurance Fund less the tax returned. The final global figure is £110 million, the bulk of which will fall on the National Insurance Fund.

Mr. O'Malley: The £60 million, £110 million and £145 million fall on the National Insurance Fund. It is true that there will be clawback through the tax system, but that does not assist the National Insurance Fund and, therefore, we have to use the higher figure in estimating the cost on that fund.

Sir Brandon Rhys Williams: I do not wish to speak at length, because this is a matter which has been picked over extensively.
Two points need to be made. I am rather surprised that the Minister of State has raised the cost argument again. Indeed, in his last intervention he sought to go over a lot of dry detail. I am sure that he is speaking in good faith, according to his lights ; but his lights seem to be a quivering lantern held before him by the blindest elements in the Treasury. He wants to know why my hon. Friends were convinced that they should support my amendment.
I shall put the argument to him which I am sure he will wish to use when explaining to a wider audience why the Government decided to maintain the amendment in the spirit of the Committee's amendment. It cannot cost the nation more to encourage people to go into productive work than to keep them in idleness, probably running down their savings and contributing nothing.
If the Minister will lift his eyes to the national picture and take his mind from purely departmental considerations he will realise that it is in the national interest to encourage people to continue working if they are capable of doing so after retirement. This argument is so simple that I am surprised that it has not reached the Minister. I hope that he will reflect on it in future.
Unfortunately, there has to be a future with the earnings rule because we have

not had a commitment from the Government benches about the eventual abolition of the rule. The Government have had their opportunity. They have not only failed to seize it ; they have actually rejected it. This is a matter of surprise and disappointment to me. I drafted two amendments which were tabled in Committee. One was a talking point: it dealt with the timetable of gradual abolition. The other was the one I expected the Government to accept. suggesting total abolition in 1980.
That date is beyond any conceivable General Election date, and I thought that the Government's calculations would be that it would be easier to accept abolition then, when it did not oblige them to do anything in the immediate future. than a phased withdrawal of the rule beginning at once. I have had to give a great deal of thought to try to understand why the Government, and Labour Members generally, preferred the timetable which led only to raising the limit to £50 a week and did not wish to commit themselves to total abolition.
I am sorry to sound a jarring note here, but it is necessary to interpret the Government's mind. They are not sincerely dedicated to abolishing the earnings rule altogether. They prefer to leave it at a cut-off point somewhere in the neighbourhood of the national average wage, so that the better-paid and professional people will still incur the earnings rule after the age of 60 in the case of women and 65 in the case of men, as a sort of new kind of surtax.
This fits in with the thinking of Labour Members. I regret this bitterly, because it is all part of the class war mentality which is ruining the country, for which the Labour Party are largely to blame. In the way they have handled this issue we see the whole thing again in an unpleasant manifestation. The public will not realise the implications of this until the earnings rule rises to £50 ; but then if the Government have their way it will stay there. That has been made clear. This is deeply regrettable and we must protest about it.
I warn Labour Members that the campaign will go on and their thinking will have to be exposed to the public. This is not only because it is bitterly unfair and wrong but because while it remains


it seems that we cannot readily move towards a unisex basis for the flat-rate pension or to the ideal of the optional retirement age, which is obviously the most humane way of dealing with the fact that not everyone is ready to retire at 60 in the case of women and 65 in the case of men.
This Procrustean bed of a fixed retirement age is something which must be

changed. I hope that the Government are bending their mind to it. They have not shown any evidence that they are. There is room for fresh thinking. The Government have not begun it. Parliament will have to return to this subject.

Question put, 'That this House doth agree with the Lords in the said amendment —

The House divided : Ayes 106, Noes 77.

Division No. 144.]
AYES
[8.28 p.m.


Allaun, Frank
Hamilton, W. W. (Central Fife)
Phipps, Dr Colin


Anderson, Donald
Harper, Joseph
Prescott, John


Armstrong, Ernest
Harrison, Walter (Wakefield)
Roderick, Caerwyn


Atkinson, Norman
Hunter, Adam
Rodgers, George (Chorley)


Bates, Alf
Jackson, Colin (Brighouse)
Rooker, J. W.


Bean, R. E.
Janner, Greville
Roper, John


Bishop, E. S.
Jones, Alec (Rhondda)
Rose, Paul B.


Blenkinsop, Arthur
Kerr, Russell
Sheldon, Robert (Ashton-u-Lyne)


Boardman, H.
Leadbitter, Ted
Short, Mrs Renée (Wolv NE)


Boothroyd, Miss Betty
Loyden, Eddie
Silverman, Julius


Brown, Hugh D. (Provan)
Lyons, Edward (Bradford W)
Skinner, Dennis


Brown, Robert C. (Newcastle W)
McElhone, Frank
Small, William


Campbell, Ian
Mackenzie, Gregor
Smith, John (N Lanarkshire)


Canavan, Dennis
McMillan, Tom (Glasgow C)
Spriggs, Leslie


Clemilson, Ivor
McNamara Kevin
Stewart, Rt Hon M. (Fulham)


Coleman, Donald
Madden, Max
Stoddart, David


Daly-ell, Tarn
Magee Bryan
Swain, Thomas


Deakins, Eric
Maguire, Frank (Fermanagh)
Taylor, Mrs Ann (Bolton W)


Dempsey, James
Marks, Kenneth
Thomas. Ron (Bristol NW)


Doig, Peter
Marshall, Dr Edmund (Goole)
Thome, Stan (Preston South)


Dormand, J. D.
Mellish, Rt Hon Robert
Tinn, James


Duffy, A. E. P.
Millan, Bruce
Urwin, T. W.


Eadie, Alex
Miller, Mrs Millie (Ilford N)
Walnwright, Edwin (Dearne V)


Ellis, John (Brigg &amp; Scun)
Morris, Alfred (Wythenshawe)
Walker, Terry (Kingswood)


Evans, loan (Aberdare)
Morris, Charles R. (Openshaw)
Weetch, Ken


Evans, John (Newton)
Moyle, Roland
Weitzman, David


Ewing, Harry (Stirling)
Murray, Rt Hon Ronald King
White, Frank R. (Bury)


Faulds, Andrew
Newens. Stanley
White, James (Pollok)


Fernyhough, Rt Hon E.
Noble, Mike
Wilson, Alexander (Hamilton)


Fitch, Alan (Wigan)
O'Halloran, Michael
Wise, Mrs Audrey


George, Bruce
O'Malley, Rt Hon Brian
Woodall, Alec


Gould, Bryan
Orme, Rt Hon Stanley
Young, David (Bolton E)


Gourlay, Harry
Ovenden, John



Graham, Ted
Palmer, Arthur
TELLERS FOR THE AYES:


Grant. George (Morpeth)
Pavitt, Laurie
Mr. James A. Dunn and Mr. Michael Cocks.


Grocott, Bruce
Pendry, Tom



Hamilton, James (Bothwell)






NOES


Arnold, Tom
Fookes, Miss Janet
Mayhew, Patrick


Atkins, Rt Hon H. (Spelthorne)
Fowler, Norman (Sutton C'f'd)
Miller, Hal (Bromsgrovs)


Bain, Mrs Margaret
Gilmour, Rt Hon Ian (Chesham)
Miscampbell, Norman


Benyon, W.
Gray, Hamish
Moate, Roger


Berry, Hon Anthony
Grylls Michael
Molyneaux, James


Body, Richard
Hamilton, Michael (Salisbury)
Montgomery, Fergus


Boscawen, Hon. Robert
Hannam, John
Morrison, Charles (Devizes)


Brittan, Leon
Hawkins, Paul
Nelson, Anthony


Brotherton, Michael
Henderson, Douglas
Neubert, Michael


Buchanan-Smith, Alick
Hicks, Robert
Newton, Tony


Budgen, Nick
Higgins, Terence L.
Page, Rt Hon R. Graham (Crosby)


Clark, Alan (Plymouth, Sutton)
Howells, Geraint (Cardigan)
Penhaligon, David


Clarke, Kenneth (Rushcliffe)
Hutchison, Michael Clark
Powell, Rt Hon J. Enoch


Cope, John
James, David
Rees-Davies, W. R


Crowder, F. P.
Kilfedder, James
Reid, George


Dean, Paul (N Somerset)
King, Evelyn (South Dorset)
Renton, Tim (Mid-Sussex)


Douglas-Hamilton, Lord James
Knight, Mrs Jill
Ross, Stephen (Isle of Wight)


Dunlop, John
Knox, David
Sainsbury, Tim


Evans, Gwynlor (Carmarthen)
Lane, David
Shepherd, Colin


Ewing, Mrs Winifred (Moray)
Lawrence, Ivan
Sims, Roger


Fairgrieve, Russell
Le Marchant, Spencer
Speed, Keith


Fisher, Sir Nigel
Macmillan, Rt Hon M. (Farnham)
Stokes, John


Fletcher-Cooke, Charles
Mates, Michael
Stradling Thomas, J.




Taylor, Teddy (Cathcart)
Weatherill, Bernard
TELLERS FOR THE NOES:


Tebbit, Norman
Welsh, Andrew
Mr. Richard Luce and Mr. Fred Silvester.


Thomas, Dafydd (Merioneth)
Winterton, Nicholas



Thomas. Rt Hon P. (Hendon S)
Young, Sir G. (Ealing, Acton)

Question accordingly agreed to.

Orders of the Day — New Clause A

RATES OF REDUCTION OF PENSION IN RESPECT OF EARNINGS OF INVALIDITY OR NON-CONTRIBUTORY INVALIDITY PENSIONERS


Lords amendment: No. 2, in page 2,


line 26, at end insert new Clause" "—


"A.—(1) Where the earnings of a person entitled to an invalidity pension or to a non-contributory invalidity pension, being a person who has not reached pensionable age, have exceeded £13·00 for the week ending last before any week for which he is entitled to an invalidity pension or a non-contributory invalidity pension, the weekly rate of pension for the last mentioned week shall be reduced—


(a) where the excess is less than £4, by 5 pence for each complete 10 pence of the excess, and


(b) where the excess is not less than £4, by 5 pence for each complete 10 pence of the excess up to £4 and by 5 pence for each complete 5 pence of any further excess.


(2) In this section "week", where used in the expression "week for which he is entitled ", means such period of 7 days as may be prescribed by regulations made for the purposes of this section."

Mr. Deputy Speaker: I call the hon. Member for Exeter (Mr. Hannam) to move his amendment to the Lords amendment, with which it will be convenient to discuss the two amendments in the name of the hon. Member for Radcliffe (Mr. Clarke)—

In line 1, leave out ' an invalidity pension or to '.

In line 5. leave out ' an invalidity pension or '.

I also call attention to the fact that privilege is involved in this amendment.

Mr. John Hannam: I beg to move, as an amendment to the Lords amendment, in line 1, leave out from beginning to ' have ' in line 3 and insert:
A.— (I) This section shall apply to a person entitled to an invalidity pension of a noncontributory invalidity pension who, while continuing to be incapacitated for normal full-time work, becomes capable of undertaking light work in circumstances which satisfy prescribed conditions.
(2) A person to whom this section applies shall continue to be entitled to benefit for so long as the prescribed conditions are satisfied but where his earnings '.

Mr. Hannam: The amendment seeks to improve the new clause which has been

added by the other place so that it can become acceptable to the Government.
We are dealing with the earnings position of invalidity pensioners, the disabled persons under retirement age, but so severely incapacitated that they qualify for the special invalidity payments to themselves and their families.
Unlike the retirement pensioner, who can earn up to £20 a week without affecting his pension and who will be able to earn by 1977 up to £50 a week, the invalidity pensioner can at present earn only £4·50 a week before he loses his entire pension. In other words, a severe and sudden wages stop takes place at £4·50 a week. This can sometimes result in the loss of four or five times that amount of earnings. I will give an example later.
This is totally unfair. in the most excellent debate which took place in the other place on 27th February, when Lord Crawshaw, who is himself disabled, moved the new clause, noble Lords from all political parties supported him in the Lobby and they secured this notable improvement for disabled people.
However, in view of the Government's reluctance to accept the clause as it


stands, the Disablement Income Group, which is an all-party organisation and pressure group, has under the drafting inspiration once again of Mr. Peter Large, its parliamentary spokesman, produced a way in the amendment of overcoming the definition problem of entitlement to earnings relaxation.
The amendment which stands in my name and that of my hon. Friend the Member for Wallasey (Mrs. Chalker), who unfortunately has been struck down by the same influenza bug as is causing myself and other hon. Members some vocal problems, would add an extra sentence in subparagraph (1) defining eligibility for a person who
 while continuing to be incapacitated for normal full-time work, becomes capable of undertaking light work in circumstances which satisfy prescribed conditions.
There are many hon. Members on both sides who have the interests of the disabled at heart. The all-party Disablement Group, of which I am secretary, seeks to lift disablement above party politics. Many important concessions have thereby been won from successive Governments. Last week, on the Report stage of the Finance Bill, the Government were nearly defeated on an amendment to relieve disabled people from the disgracefully low income surcharge level which is now to operate. If more hon. Members opposite had listened to the debate and heard the details of, for example, polio victims who are now being taxed on any income they receive over £1923 per week, many more than the eight or nine would have abstained.
The Minister of State, Treasury in that debate gave as his reason— it is linked with this debate— for not giving the concession, that the Department of Health and Social Security benefits were the right way of helping the disabled rather than Revenue concessions. This is why we have the amendment before us tonight. I hope that the Department of Health and Social Security Minister will accept his responsibility and accept the amendment.
The principle then, as now, is to help disabled people to earn their own way if they wish to and if they are able to and thereby reduce their dependence on State benefits. In case the Minister intends to deploy the argument that we are imposing an increase in Government expenditure, I

wish to assure him that I believe that the result of the amendment would be the opposite.
We have at present what has been termed a "sick or fit situation. Either a person is considered sick or unemployable and receives State aid— invalidity pension, supplementary benefits and so on — or he does a little part-time work and earns more than £4·50 a week and thereby loses his invalidity pension completely.
The consequence is that many disabled people, who can easily be certified under the prescribed regulations we suggest in the amendment by a doctor or an occupational therapist as being fit for light work, are now staying at home doing nothing and, in their own definition, becoming State cabbages. The alternative is that they become a kind of slave labour, with employers who restrict their wages to the wage-stop limit of £4·50.
On top of that, there are all sorts of fiddles arranged whereby such people work in little joint businesses and arrange for all payments to go through their wives. Such things are inevitable when a wage stop operates at such a ridiculously low level. This wage stop constitutes an earnings stop and prevents many disabled people from doing useful work, it is a hindrance, and it does not encourage people to return to work.
With a sickness benefit it is different. After a spell away from work, the doctor prescribes an ability to return to work. For the disabled invalid there is a transitional rehabilitation period during which part-time work helps a person to get back to full-time employment, and, therefore, away from dependence on the State, which is surely what we all want to achieve if possible.

8.45 p.m.

The scale of earnings rule proposed in the new clause is identical to that which was originally proposed by the Government for retirement pensioners. The House, however, subsequently decided to increase substantially the retirement amounts, but the Minister cannot object to the reasonable exemption figure of £13 a week which is proposed in this new clause. In these days of hyper-inflation £13 can represent one or two days' work. That is the sort of period which we are suggesting for part-time work for a disabled person. Above the £13 earnings


level and up to £17 there would be a 50 per cent. deduction from the pension of the £1 to £4, and above the £17 level a further 100 per cent. deduction would be made. An invalid earning £5 a day for three days' light work would lose £1 from his pension, and a person earning £7 a day for three days a week would lose £5 from his invalidity pension.

Contrast that fair and reasonable graduated earnings rule proposed here with a case which came to my attention recently of a 32-year old former librarian who 10 months ago became disabled from multiple sclerosis. He has taken up research work at home and recently received £47 for work done over a six-week period— about £8 a week. The Department of Health and Social Security removed his entire invalidity pension for that period, amounting to £73, so he lost £26 for working those few hours a week.

There are many other cases which can be quoted of people who are doing a few hours' work a week and earning up to £10 and will lose their entire invalidity pension. I hope that the evidence which I have produced will convince the House that it is wrong and unfair to allow major relaxations in the earnings rule as applied to retirement pensioners who are still able to work, while on the other hand applying a vicious wage stop to the disabled. It must be wrong to create a situation in which it is better to be a pensioner than a disabled person, where it pays to pretend to be incapable of work in order to obain the invalidity benefits, and in which a person who is willing to make a comeback and work again is prevented from doing so by the wages stop. Those of us who are actively involved in work for the disabled share the feelings of disappointment and frustration that all disabled and handicapped organisations are experiencing.

Following the Social Security Act 1973, the Secretary of State was required to make a report by September of that year on the workings of the Chronically Sick and Disabled Persons Act. A House of Commons paper published in July 1974 promised to look into the whole question of the wages stop. Nine months later many of the disablement organisations are anxiously awaiting the results of that Department of Health and Social Security inquiry.

I should like to quote from paragraph 51 of that report :
 Such evidence as there is, here and abroad, points to the possible value of a separate standard benefit to be paid to severely disabled people who are working despite their disablement "—
in other words, a wages supplement scheme, which disabled organisations are still anxiously awaiting. This proposed earnings rule is a step towards such a scheme, but without a massive charge on the Exchequer.

This fearful earnings disincentive— a disincentive psychologically and financially— must be removed, and I hope the Minister will not try to persuade us to accept some minor modification or slight uplift on the £4·50 wages stop. We want, and intend to have, at some stage for the disabled a graduated earnings rule, albeit at a much lower level than that applying to the retirement pensioner. The new clause which was accepted by the Lords introduces an earnings rule figure of £13 to £17 a week, which will allow a minimum period of rehabilitation. It will relieve the supplementary benefits system of many claims by disabled people, and it will also produce tax revenue for the hard-pressed Chancellor of the Exchequer. In addition, it will allow disabled people to regain their self-respect and independence.

Mr. Kenneth Clarke: The amendment standing in the names of my hon. Friends and myself has been grouped with that of my hon. Friend the Member for Exeter (Mr. Hannam), and both amendments are based on one carried in the House of Lords after having been moved by Lord Crawshaw, to whom the whole House is seriously indebted for having highlighted this problem. His interest in the disabled and his advocacy on their behalf is well known to us all. He succeeded in defeating the Government yet again. Once more we are debating a part of this Bill as a result of a Government defeat, and I calculate that there have been six such defeats on the Bill. That is no less than justice. There was, perhaps, room for a few more.
When the Secretary of State presented the Bill on Second Reading on 21st November last, on almost her last appearance in connection with it— I believe she has made one speech since— she described


this in column 1558 as a "package of compassion ". She went away from our debates whilst the House opened that package to find just how little it contained. When we find that we have to amend the Bill in this way to eradicate its weaknesses we are convinced that the Labour Party, in government as in opposition, wears its heart on its sleeve in relation to this sort of subject. We see on closer examination, however, that the heart is not on quite straight.
The Government's genuine achievement so far in these matters is fairly limited, as, judging from the attendance in the Chamber, is their level of interest in it. I congratulate the two Labour back benchers who are in the House. It was significant that as soon as the debate about the disabled began there was no longer a solitary Labour back bencher in the House to participate. The only occupants of the Government benches were two Ministers, a Whip and a PPS. Perhaps that is a contrast with the professions of concern for the disabled by numerous Labour Members outside this House.
I come now to the amendment which deals with the non-contributory invalidity pension. This is an important new benefit which has been heralded for a long time but which was extremely disappointing when it finally appeared in the Bill. We believe the Government misled the disabled into expecting a great deal from this benefit, and then let them down. One of the difficulties we have argued about since the Bill was presented is the 100 per cent. earnings rule, which as my hon. Friend the Member for Exeter said, is probably better described as a wage stop.
How did the Government get themselves into the difficulty which led the other place to try to amend the Bill and improve it? The trouble stems from the fact that they have welded the noncontributory invalidity pension to the old invalidity pension and they therefore took the definition of "incapacity for work "as qualifying someone for the new benefit.
We spent a lot of time in the House arguing against this basis for the new benefit. We preferred that there should be an assessment of the degree of disability of individuals as the basis on

which the non-contributory invalidity pension should be paid. However, the course adopted by the Government, which they say is administratively more convenient, means that the wage stop— or the 100 per cent. earnings rule— that applies to the contributory pension has been imported into the new benefit.
At present the only earnings allowed to the invalidity pensioner are the so-called therapeutic earnings of £4·50 a week, that figure having been maintained since 1972. It is available in extremely limited circumstances, which are set out in the regulations governing unemployment and sickness benefit. Therapeutic earnings are not normal earnings ; they are permitted only for limited categories of work. First, they are allowed if the work is undertaken under medical supervision as a part of treatment while the person concerned is a patient in or of the hospital institution, and if the earnings therefrom are less than the specified sum. Secondly, they are allowed for the work of a non-employed person where that work is not undertaken as a patient in hospital but is work which the person concerned has good cause for doing.
The figure is miserly. The definition of the kind of work that can be undertaken is extremely limited. To call them therapeutic earnings is something of an understatement. To many people who are disabled the earnings are therapeutic in more than a limited medical sense. Disabled people who are lucky enough to have some small occupation have a valuable way of keeping contact with the outside world and the world of work. It gives them some contact and activity outside the immediate range of what is necessarily a limited family and social life.
The injustice of the rule as it stands, as my hon. Friend the Member for Exeter has already well explained, is that it catches the very occasional and very light job. A disabled woman who does some envelope-writing for an organisation may easily find that she is earning more than £4·50 per week. It is not even like the retirement pensioner who loses some of his earnings. If more than £4·50 is earned there is a complete stop and the person concerned no longer qualifies for any benefit for the period that he or she is receiving a modest sum by way of wages.
By bringing that definition into their new benefit the Government have landed themselves with the problem which my noble Friend Lord Crawshaw has attempted to put right and which my hon. Friend the Member for Exeter is attempting to rephrase to deal with some of the practical difficulties.
One matter that needs to be highlighted, and to which we must return as we develop further the area of new benefits which is just being opened up, is the problem of the complete exclusion of the disabled who are in any kind of real work which provides an income, however modest.
I know that there are not many people who come into that category. That makes the public expenditure less if we try to do something to assist the disabled who are fortunate enough to have any kind of real sustained employment. It seems that there will have to be a new benefit in the form of some kind of wage supplement for those disabled who work. They tend to find that their earnings are lower than those with full physical and mental capacity. Their expenses are higher and their cost of living is higher, because of the extra expenses to which they are subjected because of their disability.
Given that we have embarked on the road of the non-contributory invalidity pension as it stands in the Bill, it seems that the disabled who work will have to wait for a new benefit and for new policies to be developed by the Government. We shall press the Government to develop such policies as soon as possible.
In the meanwhile, what are we to do with what we have already? We must try to avoid the full implications of the therapeutic earnings rule being applied to the non-contributory invalidity pension.
On looking at the amendment that was carried in another place, we share the Government's concern about the throwing over of the old rules for the contributory invalidity pension. It is the fact that the £4·50 that has remained for so long has always been accepted as being based on incapacity for work. It is applicable to those who receive sickness benefit for the specified time so that they move on to contributory invalidity pension. It is

received so long as a person is out of work. It is not intended to be paid as any kind of wage supplement once the person concerned resumes employment. It has been accepted as a benefit based on incapacity for work, but it does not exclude capacity for some very limited work. That is why we have had the therapeutic earnings rule.
I can see difficulties for some one who has been a wage earner or salary earner who begins to receive sickness benefit and who is away from work because of an accident for long enough for him to receive an invalidity pension. The difficulty under the Lords amendment will arise if he finds that he can continue receiving his invalidity pension and at the same time have a steady little job on the side. A person may be capable of doing some gardening or some other jobs for his neighbours. The benefit would run until such time as the tribunal decided that he was capable of full-time work. This could be an encouragement to some not to go back to full-time work, and it could lead to some anomalies.
As that rule has stood for so long we are a little reluctant to throw it over, which is the effect of the Lords amendment and the amendment of my hon. Friend. We wish to explore the question whether different rules may be applied to non-contributory
invalidity pensioners. They are the people who have never worked for long enough to acquire a contribution record. Can it be said that the same strict rules should apply to those who are disabled in childhood by accident, or are congenitally disabled, or are struck by a serious disease and have never been in employment? Can it be said that it would be wrong or anomalous if those people received slightly more than the therapeutic earnings rule allows for contributory invalidity pensioners who come out of employment?
My noble Friend hit upon the figure of £13. It is difficult to see why that should not be allowed when one considers the sort of people who receive the non-contributory invalidity pension. The idea needs to be explored. It is an unfortunate consequence of the Government's proposals that those people are caught by a wage stop. Our amendment seeks to remove from the Lords amendment the changes in respect of the contributory


invalidity pension but to retain the Lords amendment for the non-contributory invalidity pension.
I look forward to hearing what the Minister has to say about this possible way of meeting the genuine hardship that the present arrangements will cause to some seriously disabled people.

9.0 p.m.

Sir George Young: I support the amendment moved by my hon. Friend the Member for Exeter (Mr. Hannam), which follows logically from our recent debate when we relaxed the earnings rule for pensioners. Many hon. Members believe that the relaxation of the earnings rule for invalidity pensioners should have even higher priority than the relaxation of the rule for retirement pensioners.
The argument put forward in another place for resisting the amendment was that the invalidity pension is payable to people who are incapable of work and that there is no case for continuing to pay it when they stop work. That principle does not hold up because it has been conceded by allowing them to earn £4.50. The real argument is what should be the level of the disregard rather than whether the principle should be vigorously defended.
It was clear from the debate in another place that fixing the level at £4·50 acted as a deterrent to many people to continue to do work which might be valuable for the community. An analogy was made with unemployment benefit, and the argument advanced was that those in work do not claim unemployment benefit. Therefore, invalidity pensioners earning more than £4·50 should not claim the invalidity pension.
That is not a fair analogy. There is a clear distinction between those in work and those not in work. There is not such a clear distinction between those who are eligible for an invalidity pension and those who are incapable of earning more than £4·50. It is perfectly possible for a person to be in both categories.
One argument which is put forward for resisting amendments such as these is that of cost. At no time in the other place was the cost of the amendment declared. A reference was made to the cost being a deterrent, but I should like to know

what is the cost of the amendment which was carried in another place.
Will the Minister clarify what happens when an invalidity pensioner reaches the age of 65? Is the earnings rule lifted from £4·50 to the normal disregard for pensioners, which is £20? If so, as they grow older they will be able to earn more. An anomaly would be created if invalidity pensioners were treated differently from retirement pensioners as they approached retirement age.
In another place the amendment was carried by 72 votes to 36. I hope that my hon. Friend's amendment, which clarifies the position and makes the case much more justifiable, will be carried by an even larger majority.

Mr. David Penhaligon: I shall not delay the House for long. We must remember the arguments on these amendment against the background that by 1977 a pensioner will be allowed to earn £50 per week before pension is reduced. In the present Bill there is a proposal to remove the situation which now exists by which the invalidity pensioner earning £4·50 a week suffers not some reduction of pension but a total removal of pension. It is an absolute pension stop. This is unfair and will encourage people to evade the rule. This is a section of our community which should not be subjected to such emotional presures. Furthermore, I believe that the £4·50 stop creates enforced idleness. The really serious aspect is that it will create a situation in which many of our older citizens are bored to tears.
Great emphasis has been laid on the question of costs, but as the situation stands the provisions are so unfair that it is difficult to justify the continuance of the present system on the basis of cost alone. There is little doubt that in regard to the cases which would benefit from a change the savings would pay for a large proportion of the proposals.
I should like to hear how much the amendments would cost to implement. It has been said that the figure of £4·50 was fixed in 1972. I do not know what wage inflation has been since that time, but it certainly has been substantial. Therefore, the value of the £4·50 has been substantially reduced. The Liberals will vote on this amendment with the rest of the Opposition.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones): I intend to oppose both amendments, and I shall be inviting the House to reject them. At the same time, at a later stage, I shall be asking the House to disagree with the Lords in their amendment.
I am sure the hon. Member for Rushcliffe (Mr. Clarke) would think it remiss of me if I did not respond in some slight way to his purely political points. He suggested that the Bill was a small package. It is a little surprising that he should take that view when we see that the increased benefits provided in the Bill amount to more than £1,100 million. By no stretch of the imagination could that be regarded as a "small package ".
The hon. Gentleman chided the Government for the absence of Labour Members. That shows a slight lack of gratitude since the hon. Gentleman was able to carry his amendment on an earlier occasion with the support of Labour back benchers.
The hon. Gentleman mentioned the £4·50 therapeutic earnings limit and said that the sum had been unchanged since 1972. The Conservatives were in power in 1972–73 and we heard no suggestion then that they would seek to increase those earnings.
Having had my little bit of fun, I turn to deal with the amendments. The new clause and the amendments will change the very nature of our existing invalidity pension and non-contributory invalidity pension. There is no dispute about the need or desire to aid the disabled. It is reasonable to say that since the Bill introduces two new benefits with regard to non-contributory invalidity pension and invalid care allowance—as well as increasing existing benefits for the disabled the measure is a true indication of the fact that we accept the need and are doing something about it.
The new clause seeks to introduce into the arrangements for existing contributory invalidity pension, and for the proposed new non-contributory invalidity pension, an earnings rule similar to that which currently applies to retirement pensioners.
The existing contributory invalidity pension is payable to those who are, and have for some time been, totally incapable of doing any work for which an employer would pay them. The non-

contributory invalidity pension proposed in this Bill is no more than the same benefit without the contribution conditions. Both depend on incapacity for work. The very great majority of people who get, and who will get, this benefit earn nothing at all. A small minority—most of them mental patients who have been in hospital for a long time—earn a little by doing things which are therapy rather than work but which keep them from vegetating. Few of them have earnings of anything like £4·50 a week, which is—subject to various easements concerning working expenses—the amount of the current limit. But, overall, the general concept of total incapacity and the limited approach to therapeutic earnings is one of which we have experience on which we have built in establishing the invalidity pension and the NCIP.

Mr. Kenneth Clarke: The hon. Gentleman is describing his experience and that of his Department. I hope that it is not thought that that indicates that the effect of the rule is as limited as he suggests. Last week I visited the South Notts Centre for the Disabled. I heard many complaints there about the therapeutic earnings rule. It limits the availability of work to disabled people. They do not earn £4·50 because there is only limited work for them. The reason is that it is known by those responsible for the centre that they will not benefit if any paid work is found for them above that limit. Nevertheless, it has the effect of putting many people out of work altogether. The hon. Gentleman is quite wrong to describe the effect of the present rule as being quite so limited. What is more, my hon. Friend the Member for Exeter (Mr. Hannam) described the extent to which the rule is "fiddled "at the moment because it is so penal.

Mr. Jones: If the hon. Gentleman will bear with me, I shall deal in a moment with the level of therapeutic earnings.
We are discussing not earnings as normal people would regard them but the earnings of people who, if they are to qualify for the invalidity pension or the NCIP, must show their incapacity for work. If anyone is doing a substantial amount of work, he is not entitled to invalidity pension—and this is true even if he is earning nothing at all. With the Bill as it stands amended in another place,


the ordinary person who had to do quite a number of hours' work during a week —whether full-time or part-time—to earn even £13 would not be eligible for invalidity pension. He would be ruled out because he was working, and, as such, could not be held to be incapable of work. On the other hand, a highly-paid professional man, for example, who could get a substantial income for a minimal amount of work might be eligible for benefit. This does not seem to me a very fair result.
Quite apart from the arguments of principle which tell against the clause, the House must realise that the cost might be substantial. The hon. Member for Rushcliffe asked specifically about the cost. No one can estimate what the likely cost is. People who are at present in employment might possibly move into the invalidity benefit stakes if therapeutic earnings were increased to a level which made it more beneficial for them to do so.
Hon. Members have spoken about the need to encourage rehabilitation. The effect of replacing the therapeutic earnings limit by a full-blown earnings rule would not only be inconsistent with the fundamental basis of invalidity benefit ; its effect in terms of encouraging rehabilitation might well be exactly the opposite to what I am sure was intended by the hon. Gentleman and by the sponsors of the clause in the other place. It would mean that invalidity benefit, which is tax-free, plus earnings would amount to substantially more than earnings for disabled people in sheltered employment and substantially more than the training or rehabilitation allowances that disabled people can get while being prepared for open employment. The higher the earnings limit, the greater the likelihood that benefit plus earnings would exceed earnings in open employment.

9.15 p.m.

Mr. Hannam: Is it not clear from the amendment which I have tabled to the Lords amendment that we are describing clearly the undertaking of light work in circumstances carefully prescribed by regulations laid down? We have broken away from the original Lords amendment in the amendment. My amendment defines clearly the degree of light work for people who are not capable of normal full-time work. This is an important point.

Mr. Jones: I will deal with light work. My difficulty now, as I am sure the hon. Gentleman understands, is to deal with the two amendments and the new clause in one general debate rather than having three separate debates. I will deal specifically with light work because most hon. Members have already had experience of the use of the phrase "light work" which is not so easy to define as the hon. Gentleman seems to suggest.
These are some of the reasons for the announcement in my right hon. Friend's report to Parliament on "Social Security Provision for Chronically Sick and Disabled Persons ", House of Commons Paper No. 276, to which the hon. Gentleman referred. which was published in September. In that report my right hon. Friend indicated that the Government will take a good look at the problems of the disabled earner. We are in the main talking about the disabled earner rather than the person who is incapable of work. Once the mobility allowance and the other new benefits are properly launched, we shall be conducting further studies and consultations to see what further advances can be made to secure improvements in the level of income for disabled earners.
I believe that it is right to look at disabled earners as being in a different category from those in receipt of invalidity pension or non-contributory invalidity pension because the circumstances are so different. One group must show its incapacity for work whereas the other group has, to a greater or lesser extent, some capacity for work.
I want to make it clear to the House that in the meantime the Government do not propose to nullify the initiative taken in another place and to leave a void. The Government propose to bring forward a change which would otherwise have been reserved for a future occasion and to make regulations which will raise the present £4·50 therapeutic earnings limit to £7 from April this year. I am sure that that at least will be of some help in view of the criticisms that have been made of the level of therapeutic earnings. This change will apply not only to contributory and non-contributory invalidity pensions, but to sickness benefit, injury benefit and unemployability supplement under the industrial injuries scheme. Separate but corresponding provision will be made by prerogative instruments for


unemployability supplement under the war pensions scheme. I should add that this matter has traditionally been dealt with in regulations, that it is not really proper to principal legislation, and that the appropriate new regulations are already in course of preparation.
To sum up, the restoration of the value of the existing therapeutic earnings limit in no way creates any great problem, but the introduction of a far more radical change would lead us into considerable difficulties in this respect.
I turn now to the two amendments. Like the hon. Member for Exeter (Mr. Hannam). I am sorry that the hon. Member for Wallasey (Mrs. Chalker) is not here. I am sure that had she been here she would have contributed to the debate with her usual enthusiasm and would no doubt have quite properly attacked me for something that I might have said. Perhaps, therefore, I should say that I am glad the hon. Lady is not here, but I do not mean it in that way.
The effect would be to change the nature of the invalidity pension and the non-contributory invalidity pension. That may be the hon. Gentleman's intention, but it is not the foundation on which our present invalidity pensions are based. The amendment would make these benefits payable not only to those incapable of work, whom we have provided for in our invalidity pensions and NCIP, but would also make the benefits payable to those who are capable of doing light work. The hon. Gentleman says that we can define that expression in regulations, but a definition is much easier talked about than implemented.
In my constituency, miners who have worked underground for many years are returned to the surface for what is called "light work ". I am sure that that definition of "light work" could not be used for what the hon. Gentleman suggests. Medical checks on people receiving sickness benefit and invalidity benefit are frequently made by doctors attached to my Department, who often say that a person is not capable of doing his normal work but is capable of doing light work. Do we say to such people "The light work which we shall prescribe and which we believe you must do is a normal, everyday job "? I do not believe that it is possible to have one definition for the cases in which the hon. Gentleman is

interested and another for the ordinary category of those on sickness or invalidity pensions. We should be in impossible situations if we tried to deal with the matter in that way.
There is a worthy motive behind the amendment, which seeks some benefit from the clause but I must reject it because the result would be inconsistent with what we regard as the purpose of the invalidity pension or the non-contributory invalidity pension.
The amendment of the hon. Member for Rushcliffe would embrace the new clause inserted in another place, except that the clause would be confined to the non-contributory version of the invalidity pension. The amendment aims to import a full-blown earnings rule into the arrangements for the non-contributory invalidity pension, while retaining the therapeutic earnings limit of £4·50—soon to be £7—for contributory invalidity pension. The therapeutic earnings limit would also remain for sickness benefit, injury benefit and unemployability supplement under the industrial injuries and war pensions schemes. There would then be one rule for one benefit payable for incapacity for work—the NCIP—and another for four other benefits payable for the same contingency ; namely, incapacity for work. That sort of anomaly is hardly likely to commend itself to the hon. Gentleman when he gives it further study.
Apart from creating that glaring anomaly, the amendment is open to all the serious objections which I have already spelt out. It is impossible to reconcile a benefit which, under subsection (1) of Clause 6, can be paid only if a person is totally incapable of work, with the amendment, which would allow someone to do substantial amounts of work, even full-time under certain circumstances, and yet remain an invalidity pensioner.
We should go as far as we can to ease the restrictions on the existing incapacity benefits and on the non-contributory pension, and tackle the disabled earner problem, which is related to it, separately, but as soon and as effectively as we can. There are here, as the Government have indicated in the House of Commons paper, very real and complex problems which cannot be solved


at a stroke merely by seeking to manipulate the existing benefits upon which much of our work has depended in the past.
On this basis and on the basis of the important point that the appropriate place for the therapeutic earnings limit is in a regulation, as with the present £4·50, and not an Act, I ask the House to oppose the amendments and, later, to support the disagreement on the new clause. I am sure that this is the best course and that we should deal with those who are capable of work but who need wage supplementation in a different way from the way in which we deal with those who are, by definition, incapable of work and the non-contributory invalidity pensioner.

Mr. Kenneth Clarke: I am grateful to the Minister for addressing himself to our two amendments. I listened with care to what he said. I see some difficulties in the amendment carried in another place and the alternative version proposed by my hon. Friend the Member for Exeter (Mr. Hannam). If one has this definition of "incapable of work ", one must be clear that one is not paying the benefit to people who are in ordinary employment. However, I think; that the Minister slightly overstates his case when he talks of people working substantial hours and being in ordinary work when he is talking of £13 a week. I could not understand his reference to the possibility of highly paid professional people being able to receive this benefit, with a £13 limit having been imposed in the amendment.
Having said that, the points that the Minister made, which we would certainly wish to contemplate, were about the possibility of people drifting in from low-paid ordinary work into even lower-paid work and receiving benefit, and the possibility of someone who has been in work getting the benefit and then facing a considerable disincentive when he contemplated trying to get back into full-time work rather than relying on the benefit that he had been getting plus a small sum within the £13 proposed.
There are these difficulties. It seems to me, however, that they do not apply quite so strongly in the case of the non,contributory invalidity pensioner.

There is no question there of someone who has been in work drifting into the benefit. If he has been in work, he has a contribution record and cannot qualify for the new benefit. Similarly, again, the disincentive against drifting out is not quite the same, because the born disabled person is only too anxious to get into full-time work, if the opportunity ever presents itself.
In trying to reply, the Minister has underlined the difficulty that he has made for himself—the difficulty of using incapacity for work as the basis. There is considerable logic in what he says about the difficulties that flow if one uses incapacity for work as the basis for this new benefit as the Government have chosen to do.
The Minister said two things which are reassuring. First, as I have implied previously, the logical step from where the Government have chosen to start is to look separately at the problems of the disabled earner. These require careful study. It would be unfair to expect the Government to put forward detailed provisions now, because this is a separate problem. As the Minister has mentioned that he is commencing such study, however, which is encouraging, we shall press him for progress reports and, we trust, rapid progress. On the subject of the way in which the disabled earner can best be helped, we trust that this commitment will not be allowed to hang about for years before something is done.
I give the Minister some credit for one thing, because at least the efforts of my noble Friend in the other place have produced another look at the therapeutic earnings rule. The Minister has produced a commitment to raise it to £7. We welcome that. We congratulate him on having extracted it from his friends in the Treasury, who are more responsible, I suspect, than he is for the difficulties into which he gets on Bills of this kind, in both Houses of Parliament. As he has managed to extract some money from that source, even though the £7 will not do much more than keep in line with inflation we accept that he has done something, and that the thought that has gone into the earnings rule has had some effect.
The Opposition will return to the problem of the disabled earner whenever


possible, to press the Government. We shall return to it on future uprating Bills, on the question of the level of the therapeutic earnings rule and, still, the question—which we should like to consider further—whether something may be done in relation to recipients of NCIP which would give them a slightly advantageous position, for reasons which we believe are defensible, vis-à-vis other benefits.
However, as the Minister has been able to bring some good news on this occasion, I beg to ask leave to withdraw the amendment.

Mr. Speaker: Now there is a slight confusion, because I do not think the hon. Member has actually moved this amendment.

Mr. Kenneth Clarke: In that event I am relieved of the obligation of withdrawing it.

Mr. Hannam: I should like to reply to the point made by the Minister in answer to my amendment.

Mr. Speaker: Order. This is by leave of the House?

Mr. Hannam: By leave of the House.
The problem of definition is one which we always seem to come up against. We had exactly the same situation in the debates on disabled housewives, when we sought to define household work. The point has been made again and again by the disabled organisations that if the experts from the Disablement Income Group or other organisations were given the task of defining light work, such as the work which lift attendants do, they would have no difficulty in prescribing those regulations within one week. The Minister has moved only a small way towards helping those disabled people who want to rehabilitate themselves in normal employment. The £2·50 increase barely keeps pace with inflation and does nothing to help the cases I quoted, such as that of the ex-librarian on £8 a week.
I am afraid that I have to ask hon. Members to support my amendment.

Question put. That the amendment be made :—

The House divided : Ayes, 54, Noes 109.

Division No. 145.
AYES
9.32 p.m.


Arnold, Tom
Hamilton, Michael (Salisbury)
Newton, Tony


Bain, Mrs Margaret
Henderson, Douglas
Page, Rt Hon R. Graham (Crosby)


Body, Richard
Hicks, Robert
Paisley, Rev. Ian


Brittan, Leon
Howells, Geratnt (Cardigan)
Penhaligon, David


Brotherton, Michael
KIKedder, James
Powell, Rt Hon J. Enoch


Budgen, Nick
Knox, David
Reid, George


Clark, Alan (Plymouth, Sutton)
Lane, David
Renton, Tim (Mid-Sussex)


Cope, John
Lawrence, Ivan
Ross, Stephen (Isle of Wight)


Crowder, F. P.
Macmillan, Rt Hon M. (Farnham)
Ross, William (Londonderry)


Douglas-Hamilton, Lord James
Mates, Michael
Shepherd, Colin


Dunlop, John
Mayhew, Patrick
Sims, Roger


Evans, Gwynfor (Carmarthen)
Miller, Hal (Bromsgrove)
Thomas, Rt Hon P. (Hendon S)


Ewlng, Mrs Winifred (Moray)
Mlecampbell, Norman
Vlggers, Peter


Fisher, Sir Nigel
Moate, Roger
Wainwright, Richard (Colne V)


Fletcher-Cooke, Charles
Molyreaux, James
Welsh, Andrew


Fookes, Miss Janet
Montgomery, Fergus
Winterton, Nicholas


Gllmour, Rt Hon Ian (Chesham)
Morris, Charles R. (Openshsw)
TELLERS FOR THE AYES


Gray, Hamish
Nelson, Anthony
Mr. John Hannam and


Grylls, Michael
Neubert, Michael
Sir George Young.




NOES


Allaun, Frank
Deakins, Eric
Grant, George (Morpeth)


Anderson, Donald
Dempsey, James
Grocott, Bruce


Armstrong, Ernest
Dolg, Peter
Hamilton, James (Bothwell)


Atkinson, Norman
Dormand, J. D.
Hamilton, W. W. (Central Fife)


Bates, Alt
Duffy, A. E. P.
Harper, Joseph


Bean, R. E.
Dunn, James A.
Harrison, Walter (Wakefield)


Bishop, E. S.
Eadle, Alex
Hunter, Adam


Blenklnsop, Arthur
Ellis, John (Brlgg &amp; Scun)
Jackson, Miss Margaret (Lincoln)


Boardman, H.
Evans, loan (Aberdare)
Janner, Greville


Boothroyd, Miss Betty
Evans, John (Newton)
Jay, Rt Hon Douglas


Brown, Hugh D. (Provan)
Ewlng, Harry (Stirling)
Jones, Alec (Rhondda)


Brown, Robert C. (Newcastle W)
Faulds, Andrew
Kerr, Russell


Callaghan, Jim (Middleton &amp; P)
Fernyhough, Rt Hon E.
Lamond. James


Campbell, Ian
Fitch, Alan (Wlgan)
Leadbitter, Ted


Canavan, Dennis
George, Bruce
Loyden, Eddie


Clemitson, Ivor
Gould, Bryan
Lyons, Edward (Bradford W)


Cocks, Michael (Bristol S)
Gourlay, Harry
McElhone, Frank


Dalyell, Tarn
Graham, Ted
Mackenzie, Gregor




McMillan, Tom (Glasgow C)
Ovenden, John
Taylor, Mrs Ann (Bolton W)


McNamara, Kevin
Palmer, Arthur
Thomas, Ron (Bristol NW)


Madden, Max
Pavitt, Laurie
Thorne, Stan (Preston South)


Magee. Bryan
Phipps, Dr Colin
Tinn, James


Maguire, Frank (Fermanagh)
Prescott, John
Urwin, T. W.


Mahon, Simon
Roderick, Caerwyn
Walnwright, Edwin (Dearne V)


Marks, Kenneth
Rodgers, George (Chorley)
Walker, Terry (Kingswood)


Marshall, Dr Edmund (Goole)
Rooker, J. W.
Weetch, Ken


Millan, Bruce
Roper, John
Weitzman, David


Miller, Mrs Millie (Ilford N)
Rose, Paul B.
White, Frank R. (Bury)


Mitchell, R. C. (Soton, Itchen)
Sheldon, Robert (Ashton-u-Lyne)
White, James (Pollok)


Morris, Alfred (Wythenshawe)
Silverman, Julius
Wilson, Alexander (Hamilton)


Morris, Charles R. (Openshaw)
Skinner, Dennis
Wise, Mrs Audrey


Moyle, Roland
Small, William
Woodall, Alec


Murray, Rt Hon Ronald King
Smith, John (N Lanarkshire)
Young, David (Bolton E)


Newens, Stanley
Snape, Peter



Noble, Mike
Spriggs, Leslie
TELLERS FOR THE NOES


O'Halloran, Michael
Stewart, Rt Hon M. (Fulham)
Mr. Donald Coleman and Mr. Tom Pendry


O'Malley, Rt Hon Brian
Stoddart, David



Orme, Rt Hon Stanley
Swain, Thomas

Question accordingly negatived.

Mr. O'Malley: I beg to move, That this House doth disagree with the Lords in the said amendment.

Question put and agreed to.

Lords amendment disagreed to.

Subsequent Lords amendments agreed to.

Clause 7

INVALID CARE ALLOWANCE

Lords Amendment : No. 5, in page 7, line 6, leave out from "employed ;" to end of line 9.

The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): I beg to move, That this House doth disagree with the Lords in the said amendment.

Mr. Speaker: With this it will be convenient to discuss Lords Amendment No. 6, in page 8, leave out lines 15 to 17.
I draw the attention of the House to the fact that Privilege is involved.

Mr. Morris: The Government's purpose in asking the House to disagree with these amendments is so that they may restore Clause 7, which provides for the invalid care allowance, to the form in which it was originally introduced. This would enable the Government to pay the allowance to relatives of severely disabled persons receiving attendance allowance, as a first step. Later, when we had "run in" the administrative machine which will have to be created for the allowance, we would hope to extend it to the equally deserving case of non-relatives.
The amendments which have been made in another place are, in substance, the same as those moved and defeated in this House on Report.

9.45 p.m.

I must make it patently clear again that the reason why right hon. and hon. Members on the Government side of the House voted against the amendments was not that they disagreed with the principle of giving non-relatives the invalid care allowance. Quite the contrary : we are just as keen as anyone anywhere—and that includes another place—to see the ICA extended in this way. What my right hon. and hon. Friends were and are saying is that the Government are justified in treading warily and that the success of the introduction of ICA in particular, and of the Government's unfolding programme in general, must not be jeopardised.

The Government's opposition to the amendments made in another place is based on the fact that in proposing an ICA at all we are moving into unknown territory. Until my right hon. Friend's report to Parliament on "Social Security Provision for Chronically Sick and Disabled People" was published on 13th September 1974, successive Governments over many years had said consistently that those who are to be helped by the invalid care allowance could be dealt with only through supplementary benefit.

We have now undertaken to help such people without means-testing, and we are incorporating credits with the benefit. This is an enormous step forward, and I suspect that some of those who have long pleaded for an invalid care allowance have been surprised that it is now being legislated for.

We have acted, and we are providing a new benefit where other Governments offered only sympathy. We have said that at least 11,500 people might benefit. Yet such is the dearth of statistics that we should not be very surprised if a substantially greater number did so. Add to that the fact that ICA is an entirely new concept and the case for proceeding cautiously is compelling.

As the Bill stood when it left this House, we would have had the power to bring in the deserving cases of nonrelatives—I make no apology for emphasising yet again that the Government are as much concerned about these cases as any right hon. or hon. Member on either side of the House—in a progressive and systematic way, once we had got over the initial and major hurdle of paying the benefit to relatives. This still seems to the Government to be the right approach, leaving aside the question of the cost, which might be considerable. For every 2,500 additional beneficiaries, the cost would go up by an extra £1 million.

There is, however, another question to which I beg the House to give the most serious consideration. Neither the extension of ICA to non-relatives, nor even the ICA itself, can be looked at in isolation. ICA is part of a structure of benefits that are related one to the other but are at the same time separate, in the sense that they deal with different contingencies affecting disabled people. It is one of a series of improvements in social security benefits, which the Government are anxious to introduce, and which can be introduced only on the basis of a carefully phased programme for which the necessary resources in terms of money, skilled manpower— both medical and lay —and office buildings will have to be found.

The House as a whole will readily appreciate that a formidable array of tasks faces the Department over the next few years. Known commitments alone entail increases in pensions and other benefits for about 11½ million beneficiaries at each uprating. The Bill deals with only the first of this year's upratings, and there will be another of these massive operations for the staff to cope with before the year is out. There are also the increases in family allowances for about 4½ million families and the revision of

supplementary benefit disregards affecting some 800,000 people.

Next month sees the introduction of the new earnings-related contribution, with consequential effects on contributory benefits. We have ahead of us also, as a result of the provisions of the Bill, the introduction of the non-contributory invalidity pension for chronically sick and disabled people. There will be a total of well over 250,000 people involved, including patients in mental hospitals and disabled housewives. In due course there will be the new mobility allowance, which will eventually reach up to 100,000 beneficiaries.

Is it really to be wondered that the Government want to proceed carefully with the invalid care allowance? Is it too much to ask that we should allow a little while longer for the staff, who have to bear the brunt of the work involved in all the demands that we make on them, to get the ICA on to a working basis?

The invalid care allowance has been designed primarily to meet the case of the single daughter who would be a breadwinner in paid employment but for the need to stay at home to look after a severely disabled parent or parents. The Government do not, however, intend to confine ICA to the daughter-parent relationship. The nub of the Government's case is that the power will be exercised and that the deserving cases of non-relatives will be brought into the ICA arrangements, once we have got over the initial and major hurdle of paying the allowance to the relatives. It would be deeply unfortunate if anyone thought that we do not intend to bring caring non-relatives into the scheme as soon as we can.

There are some very good arguments for introducing overnight all the new benefits which assist chronically sick and disabled people and their families—not only the ICA, but also the noncontributory invalidity pension, the housewives' invalidity pension and the mobility allowance, as well as all our other improvements in which disabled people will share. However, it would not be in the interests of either the people for whom the benefits are intended or of those with the job of administering them to try to do the impossible. The Government have put forward an unprecedented number


of proposals in a very short space of time and it is inevitable that it will take time to implement them. That is why the Government are seeking to stick to the phased timetable for ICA, to allow us to take one step at a time. There is very little difference between us, and I hope that the House as a whole will join me in disagreeing with the Lords amendment.

Mr. Robert Boscawen: This is the third of the major groups of amendments that have been carried by Parliament against the Government's advice and have greatly improved what we believed was a very inadequate Bill when it was brought before the House last October.
The first of the amendments was the phasing out of the earnings rule. The second was the extension of the noncontributory invalidity pension to cover the disabled housewife who cannot perform normal household duties. That was a very necessary measure which the House carried a few weeks ago. We are delighted that the Government have been sufficiently wise as to keep that in the Bill.
The third group of amendments concerned the extension of the new invalidity care allowance to groups of people who are not relations. I am glad that the hon. Gentleman gave an undertaking tonight that it is the Government's absolute intention to introduce this allowance as soon as possible for those who are not blood relations. We believe that it is vitally necessary that they do so, became the Government are creating, by seeking to overthrow the Lords amendment, a host of cruel anomalies which will be a stick for beating their own backs.
I assure the Government that it is always the cruellest anomalies that come back on the unfortunate Government of the day who introduce a new benefit. The Conservative Government found that when we introduced the invalidity pension and other benefits. It is the small anomalies that harm the major provisions of a new benefit so much.
The Under-Secretary referred to the desirability of proceeding carefully. They are already proceeding carefully. It is not proposed to introduce this new benefit until 1976–77, so there is plenty of time in which to get the Department organised,

to get the plans laid and to get ready to introduce this new benefit

Mr. Alfred Morris: The hon. Gentleman will recall that I said that the invalidity care allowance is one of a series of new benefits which we are phasing in. It is the totality of what we are seeking to carry through which makes it essential that we should introduce each step of a new benefit in an orderly manner.

Mr. Boscawen: I have not argued against introducing it in 1976–77, but I suggest that when it is introduced in 1976–77 it is introduced in the way proposed in the Lords amendment. One reason is that by excluding those who are non-blood relatives the Government are making their task harder because they will have to identify relatives. This surely means another process. By making this allowance available to anyone, whether he is a relative or a non-relative, looking after either a friend or a relative who is seriously ill, we are not creating any further work for the Department. We are creating less work because it will not be necessary to identify relations. The assumption will be that anyone can benefit from the Bill provided he complies with the necessary qualifications. That is the first point I make against the argument that more time is required in order to proceed more carefully.
My second point deals with the necessity to help as soon as possible those persons who look after a friend. At present anyone who gives up work in order to help a seriously disabled or chronically sick person who is not a relative is not entitled to draw supplementary benefit. That has been an age-old regulation of the Supplementary Benefits Commission. I think the Under-Secretary of State will agree that that is so.
There are not many of these people. but their position is the more difficult because they are left with the dilemma of deciding whether or not they should give up work in order to help a friend. I was given an example of a person with whom another lady had been living for many years. She had to decide whether she should give up work in order to attend her friend who had developed serious mental illness over a period of time, and who finally became a severe schizophrenic. Should she give up work and receive no supplementary benefit, or


should she continue in work and allow her friend to go into a home or a place of residential care? That is the dilemma which faces some people. We on this side of the House want, by means of this measure, to overcome that sort of difficulty as soon as possible. We accept the invalid care allowance, and we congratulated the Government when the Bill was introduced on having presented the idea. We understand why it will not be possible to introduce it before 1976–77.

It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the consideration of Lords Amendments to the Social Security Benefits Bill and the Export Guarantees Amendment Bill may be proceeded with, though opposed, until any hour, and that the Motion relating to the European Monetary Cooperation Fund may be proceeded with, though opposed, until half-past Eleven o'clock or one and a half hours after it has been entered upon, whichever is the later.—[Mr. Dormand.]

Orders of the Day — SOCIAL SECURITY BENEFITS BILL

Question again proposed, That this House doth disagree with the Lords in the said amendment.

Mr. Boscawen: We feel very strongly that we want the scheme introduced in the way that the Lords have amended it. But there is a further reason for doing so. This was made clear by Baroness Seear in another place. She has quite clearly had a great deal of experience of these matters since she is Chairman of the National Association of Single Women and Dependent Relatives. The point she made is that often there is a good social reason why a person looking after a relative should not be doing so, why he or she should be going out to work and another person should be living-in and looking after the disabled person. I am sure that the Minister understands that.
If the Minister persists in seeking to disagree with the Lords amendment we shall have to press the matter to a Division. I hope that he will have second thoughts. There is not much that divides us on this issue, only, it seems, differences

arising for administrative reasons. I hope that I have persuaded the Minister that for a very strong administrative reason it would be better to introduce the ICA without the distinction between relatives and non-relatives.

Mr. Penhaligon: The Minister says that he is concerned about this issue, and I am inclined to believe him. He says that he will oppose the Lords amendment because of the time factor, because the uprating is causing great problems among his staff, and because of some of the reforms being brought in. The tremendous turmoil into which we are getting over the upratings is mainly a reflection of the terrible problem of inflation. The whole Bill is mainly about inflation. Great pride is taken in the fact that we are now spending about £1,100 million extra on benefits, but we shall have to devise some new terminology to cope with inflation, because much of this money is not real "purchasing" money, it is "Monopoly" money, and those who are receiving it know that.
We are asking that the invalid care allowance should be made available to persons other than strict blood relatives of the severely disabled. I do not know what the definition of "relative" is, because I have read somewhere that we are all related to each other by the 37th generation. We are told that if the daughter looks after the mother she will receive assistance, and that if one brother looks after another brother he will receive assistance. If there are two sisters looking after each other we shall give them assistance. In all the cases that I have mentioned there would be some responsibility, in a moral sense, to look after the relative.

Mr. Alfred Morris: The question is not whether we include the non-relative but whether we include relatives and non-relatives at the outset. It would be most unfortunate if anything said in this debate gave the impression outside the House that we were excluding non-relatives. That is not our intention.

Mr. Penhaligon: I understand that. We wish to give the Government a little encouragement to bring forward these measures a little earlier than is intended. Where there is some sort of moral responsibility among relatives we shall give an


invalidity care allowance. We are saying that two people who have no strict moral commitment—for example, one friend choosing to look after the other—should also receive the allowance. It was admitted in another place that the bulk of these cases is covered by the blood relative definition. The number of people involved in the category to which I am drawing attention is small. Therefore. I cannot understand the arguments, that are put forward.
The question of cost has been raised. In fact, our suggestion is one of the best ways of saving money. I know from my own experience that the poor person who is in need of an invalidity care allowance and who is not given it goes into an institution. What are the current costs of looking after a person in an institution? If we save one person from entering an institution we shall probably cover the cost of six people receiving the invalidity care allowance.

We are saying that in the short term we are being cruel to people who would much prefer to stay at home as their health deteriorates quickly. In the long term the Government and my party have the same objective, but in the short term, why do we penalise a loyalty based on friendship? For example, two women may well have a loyalty based on friendship. Why penalise that loyalty? It is admitted by the Government that such people are a minority. Why should we exclude them from the invalidity care allowance. I ask the Government to consider this matter again. If the allowance is not extended in the way we suggest, I must warn the Government that the Liberal Party will be after them. We feel that we must vote with the Conservative Opposition.

Question put. That this House doth disagree with the Lords in the said amendment :—

The House divided :Ayes, 105. Noes 76.

Division No. 146.]
AYES
10.8 p.m


Allaun, Frank
Graham, Ted
Ovenden, John


Anderson, Donald
Grant, George (Morpeth)
Palmer, Arthur


Armstrong, Ernest
Grocott, Bruce
Pavltt, Laurie


Atkinson, Norman
Hamilton, James (Bothwell)
Pendry, Tom


Bates, Alf
Harrison, Walter (Wakefield)
Phlpps, Dr Colin


Bean, R. E.
Hunter, Adam
Prescott, John


Bishop, E. S.
Jackson, Miss Margaret (Lincoln)
Roderick, Caerwyn


Blenkinsop, Arthur
Janner, Greville
Rodgers, George (Chorley)


Boardman, H.
Jones, Alec (Rhondda)
Rooker, J. W


Boothroyd, Miss Betty
Kerr, Russell
Roper, John


Brown, Hugh D. (Provan)
Lamond, James
Rose, Paul B.


Brown, Robert C. (Newcastle W)
Leadbitter, Ted
Sheldon, Robert (Ashton-u-Lyne)


Callaghan, Jim (Middleton &amp; P)
Loyden, Eddie
Silverman, Julius


Campbell, Ian
Lyons, Edward (Bradford W)
Skinner, Dennis


Canavan, Dennis
McEIhone, Frank
Small, William


Clemitson Ivor
Mackenzie, Gregor
Smith, John (N Lanarkshire)


Cocks, Michael (Bristol S)
McMillan, Tom (Glasgow C.)
Snape, Peter


Coleman, Donald
McNamara, Kevin
Stewart, Rt Hon M. (Fulham)


Dalyell Tarn
Madden, Max
Taylor, Mrs Ann (Bolton W)


Deaklns, Eric
Magee, Bryan
Thomas, Ron (Bristol NW)


Dempsey, James
Maguire, Frank (Fermanagh)
Thorne, Stan (Preston south)


Dolg, Peter
Mahon, Simon
Tinn, James


Dorm'and, J. D.
Marks, Kenneth
Urwin, T. W.


Duffy, A. E. P.
Marshall, Dr Edmund (Goole)
Wainwright, Edwin (Dearne V)


Dunn, James A
Millan, Bruce
Walker, Terry (Kingswood)


Eadle, Alex
Miller, Mrs Millie (Ilford N)
Weetch, Ken


Ellis, John (Brigg &amp; Scun)
Mitchell, R. C. (Soton, Itchen)
White, Frank R. (Bury)


Evans, Gwynfor (Carmarthen)
Morris, Alfred (Wythenshawe)
White, James (Pollok)


Evans, loan (Aberdare)
Morris, Charles R. (Openshaw!
Wilson, Alexander (Hamilton)


Evans, John (Newton)
Moyle, Roland
Wise, Mrs Audrey


Ewlng, Harry (Stirling)
Murray, Rt Hon Ronald King
Woodall, Alec


Faulds, Andrew
Newens, Stanley
Young, David (Bolton E)


Fernyhough, Rt Hon E
Noble, Mike



Fitch, Alan (Wigan)
O'Halloran, Michael
TELLERS FOR THE AYES:


George, Bruce
O'Malley, Rt Hon Brian
Mr. Joseph Harper and


Gould, Bryan
Orme, Rt Hon Stanley
Mr. David Stoddart.


Gourlay, Harry






NOES


Arnold, Tom
Boscawen, Hon. Robert
Clark, Alan (Plymouth, Sutton)


Atkins, Rt Hon H. (Spelthorne)
Brittan, Leon
Clarke, Kenneth (Rushcliffe)


Bain, Mrs Margaret
Brotherton, Michael
Cope,John


Berry, Hon Anthony
Buchanan-Smith Alick
Douglas-Hamilton, Lord James


Body, Richard
Budgen, Nick
Ewlng, Mrs Winifred (Mora))




Fairgrieve, Russell
Macmillan, Rt Hon M. (Farnham)
Shepherd, Colin


Fisher, Sir Nigel
Marshall, Michael (Arundel)
Silvester, Fred


Fletcher-Cooke, Charles
Mates, Michael
Sims, Roger


Fowler, Norman (Sutton C'f'd)
Mayhew, Patrick
Speed, Keith


Gilmour, Rt Hon Ian (Chesham)
Miller, Hal (Bromsgrove)
Steel, David (Roxburgh)


Gray, Hamish
Miscampbell, Norman
Stokes, John


Gryils, Michael
Moate, Roger
Stradling Thomas, J.


Hannam, John
Molyneaux, James
Taylor, Teddy (Cathcart)


Hawkins, Paul
Montgomery, Fergus
Tebbit, Norman


Henderson, Douglas
Morrison, Charles (Devizes)
Thomas, Rt Hon P. (Hendon S)


Hicks, Robert
Neave, Airey
Thompson, George


Higgins, Terence L.
Nelson, Anthony
Viggers, Peter


Howell, David (Guildford)
Neubert, Michael
Wainwright, Richard (Coine V)


Howells, Geraint (Cardigan)
Newton, Tony
Weatherlll, Bernard


Hutchison, Michael Clark
Page, Rt Hon R. Graham (Crosby)
Welsh, Andrew


James, David
Paisley, Rev Ian
Winterton, Nicholas


Kilfedder, James
Penhaligon, David
Young, Sir G. (Ealing, Acton)


Knight, Mrs Jill
Powell, Rt Hon J. Enoch



Knox, David
Reid, George
TELLERS FOR THE NOES


Lane, David
Renton, Tim (Mid-Sussex)
Mr. W. Benyon and Mr. Richard Luce


Lawrence, Ivan
Ross, William (Londonderry)



Le Marchant, Spencer
Sainsbury, Tim

Question accordingly agreed to.—[Special entry.]

Lords amendment : No. 6, in page 8, leave out lines 15 to 17.

Question proposed, That this House doth disagree with the Lords in the said amendment.—[Mr. O'Malley.]

Question put and agreed to.

Subsequent Lords amendments agreed to.

Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments to the Bill : Mr. Boscawen, Mr. Kenneth Clarke, Mr. John Ellis, Mr. O'Malley and Mr. Alfred Morris ; three to be the quorum.—[Mr. O'Malley.]

To withdraw immediately.

Reasons for disagreeing to certain of the Lords amendments reported, and agreed to ; to be communicated to the Lords.

Orders of the Day — EXPORT GUARANTEES AMENDMENT [MONEY] (No. 2)

Queen's Recommendation having been signified—

Resolved,

That, for the purposes of any Act of the present Session to make further provision in connection with the powers and duties of the Secretary of State under the Export Guarantees Acts 1968 and 1970, it is expedient to authorise the payment out of moneys provided by Parliament of the expenses of the Secretary of State under arrangements for making payments to persons who have entered into export

5
(1) For the purpose of encouraging trade with other countries, the Secretary of State may with the consent of the Treasury make arrangements for making payments to persons carrying on business in the United Kingdom, the Isle of Man or the Channel Islands who have entered into export contracts, being payments related to such increases in the cost of labour, materials or other matters as may be specified by or under the arrangements.



(2) Arrangements under this section may contain such terms and conditions as the Secretary of State thinks fit, including provisions requiring payments to be made to the Secretary of State as consideration for his entering into the arrangements.


10
(3) Any expenses incurred by the Secretary of State under this section shall be paid out of moneys provided by Parliament, and any sums received by him by virtue of this section shall be paid into the Consolidated Fund.


15
(4) Subject to subsection (5) below, no arrangements shall be made under this section after the expiration of the period of two years beginning with the date of the passing of this Act.


20
(5) The Secretary of State may by order extend the period during which arrangements may be made under this section by not more than one year at a time; and any order under this subsection shall be contained in a statutory instrument, and no such order shall be made unless a draft of it has been laid before and approved by resolution of the House of Commons.—[Mr. Deakins.]

Brought up and read the First time.

10.22 p.m.

The Under-Secretary of State for Trade (Mr. Eric Deakins): I beg to move, That the clause be read a Second time.

Mr. Speaker: With this, it is suggested that we discuss the following amendments to the proposed clause :

(a), in line 5, after "materials ", insert
' design and consultancy services, research, development '.

(b), in line 6, at end insert
' but excluding increases in interest costs '.

(c), in line 11, after "Parliament ", insert
' and shall be separately treated and identified in the accounts of the Export Credit Guarantees Department '.

(d), in line 20, at end insert
' but the Secretary of State shall not make more than five such orders under this subsection'.

contracts, being payments related to increases in the cost of labour, materials or other matters.—[Mr. Deakins.]

Orders of the Day — EXPORT GUARANTEES AMENDMENT BILL

As amended (in the Standing Committee), considered.

New Clause 1

PAYMENTS TO EXPORTERS IN RESPECT OF COST INCREASES

Government Amendments Nos. 3, 4 and 11 and the proposed amendment to Amendment No. 11, in line 3, at end add
' but subsequent to 20th February 1975 '.
and Government Amendments Nos. 12 and 13.

Mr. Deakins: On 20th February, my right hon. Friend the Secretary of State announced that, in view of the difficulties facing major capital goods exporters, an amendment would be introduced to the Export Guarantees (Amendment) Bill. This would provide some measure of protection to such exporters by partially covering them against a higher than expected rate of inflation.
Before I refer to the details of the clause, there are one or two general points I should like to make. During the Second Reading and Committee stages of this Bill, many Opposition Members


referred to the particular and serious problems facing capital goods exporters and main contractors and to the need for some measure of Government assistance. I believe that the measures which will be introduced as a result of this clause will provide this assistance and that they will be generally welcomed by both sides of industry. I am conscious that some may feel that they do not go far enough, but this is a point to which I shall return.
The decision to introduce this kind of arrangement is not one which the Government have taken lightly. British exporters of major capital goods have been at an increasing disadvantage compared to those who enjoy some measure of protection from their governments against high and unpredictable levels of price changes. As the House knows, successive British Governments have long tried internationally to persuade others to discontinue their practice of indemnifying their exporters against rises in costs. Despite making clear in these representations that we might otherwise have to give British firms some similar support, 1 regret to say that these efforts met with little success. The Government feel, therefore, that the time has come to provide assistance to those United Kingdom exporters facing the most serious problems.
The precise details of the scheme are being drawn up as quickly as possible, and we hope that they will be finalised by the time the legislative process is complete. Discussions are already in progress with industry between Government Departments. However, the broad principles of what we contemplate are clear.
Essentially, the scheme is designed as a temporary measure to meet the abnormal difficulties of cost inflation. We certainly do not see the scheme becoming a permanent feature of ECGD's facilities and services.
The scheme certainly involves assistance to exporters, but with the specific aim of restoring their competitiveness in the major capital goods field. It will thus be confined to this field where the need for help is most serious and pressing. What is more, it is not a blank cheque or an open-ended commitment to pay irrespective of the level of cost inflation. In practice, it will contain positive incentives for exporters to control

their cost increases which exporters unavoidably incur. It will also contain a specific incentive to exporters to go for cash contracts which immediately benefit the balance of payments as opposed to credit contracts.
In drawing up the scheme regard must of course be paid to one point I made during my speech opening the Second Reading debate—namely, the difficult, but inescapable, problem of striking a balance between the support and promotion of exports and the cost of doing this. We believe that the guidelines set out by my right hon. Friend the Secretary of State for Trade represent a reasonable balance.
With the need to strike this balance very much in our minds, we have decided to exclude production line goods from the scheme. Restriction of the scheme to major capital goods contracts inevitably raises problems of definition. These will not be easy to solve, but I am now consulting my colleagues and industry with the aim of establishing sensible guidelines as soon as possible.
Let me now turn to the clause. This is widely drawn and there are a number of good reasons for this. Details of how the scheme will operate are still being worked out. I do not apologise for my right hon. Friend announcing the scheme in principle before all the details had been finalised. Evidence was reaching the Government that British firms were beginning to hesitate to sign a number of major capital goods contracts in highly important markets because of the insurmountable problems from unpredictable upsurges in their costs. It was necessary to give them some reassurance rapidly. There was an element of psychological stimulus here which, when we come to look back, may well prove to have been just as important as the precise details of the scheme.
In addition, there is, I think, a real need for the powers to be drawn in such a way as to enable ECGD to be able to react flexibly and quickly to changing situations.
Subsection (1) enables the Secretary of State, acting through ECGD, to make arrangements for making payments to persons carrying on business in the United Kingdom who have entered into export contracts. For the purpose of this Bill the


term "export contract" means a contract in respect of which guarantees have been or can be given under Sections 1 or 2 of the 1968 Act. In other words, arrangements may be applied to contracts which ECGD has not in fact guaranteed but would be able to do so. The payments will relate to such increases in the cost of labour, materials or other matters as may be specified by or under the arrangements. These arrangements must be for the purpose of encouraging trade with other countries and can be made only with the consent of the Treasury.
In practice, therefore, the Secretary of State, via ECGD, will have discretion both in terms of the contracts "covered" and on the terms of the arrangements made. This is, I think, desirable for all kinds of reasons, not least to reflect the points that I have just made.
The term "arrangements" follows the use of the same term in Sections 1 and 2 of the 1968 Act and in Section 1 of the 1972 Act in relation to overseas investment insurance. The arrangements will in practice be embodied in a formal agreement in each individual case with the persons concerned after discussions and negotiations with ECGD.
The scheme will apply to major capital goods contracts with an individual value of £2 million or more with manufacturing periods of two years or more. Exporters will have to bear or pass on to buyers at least the first 10 per cent. per annum of increased costs, but the Government will then cover 85 per cent. of eligible
The restriction to 85 per cent. or 90 per annum band above that minimum level. In the case of cash contracts this protection will be increased to 90 per cent. within a 15 per cent. per annum band.
The restriction to 85 per cent, or 90 per cent. within the band provides some incentive to exporters to try to control their costs. The wider band of 15 per cent. for cash contracts, rather than credit contracts at 10 per cent., gives an incentive for the exporter to try for cash payment rather than to offer credit terms. Cash payment produces a quicker return to the balance of payments and the absence of credit also avoids the need to provide fixed rate finance at the special export rate. The fact that the 10 per cent. thres-

hold is a minimum means that the band of cover can float. The exporter can take cover from 10 per cent. to 20 per cent., for instance, or he can choose cover from, say, 13 per cent. to 23 per cent. or from 18 per cent. to 28 per cent. He therefore has a further incentive to pass on the maximum possible amount of cost increase to overseas buyers.
Payments under the arrangements will be related to such increases in the cost of labour, materials and other matters as may be specified by or under the arrangements.

10.30 p.m.

Mr. Terence Higgins: The hon. Gentleman is reading what he has to say, and, as always, is reading it carefully. But it is difficult to catch exactly what he says at the speed at which he is reading it. Could he explain in his own words the percentages to which he is referring?

Mr. Deakins: I apologise for perhaps going a little too quickly, but I thought that most hon. Members here had served on the Committee. However, obviously some did not.

Mr. Higgins: This point was not covered at all in Committee.

Mr. Deakins: I shall read out the percentages again for the benefit of the House. Exporters will have to bear, or pass on to buyers, at least the first 10 per cent. per annum of increased costs. But the Government will cover 85 per cent. of eligible cost increases above that level, within a 10 per cent. band above that minimum level.
The 10 per cent. threshold before the Government start bearing a share of the eligible cost increase is a minimum figure, so the exporter could choose to have 85 per cent. of his eligible cost increases met between, say, 10 per cent. and 20 per cent. or if he took a different view about the course of inflation or his ability to pass on his cost increase to overseas buyers, he could have a band from, say, 15 per cent. to 25 per cent. He would bear or pass on the first 15 per cent. in that case, at his own choice, and 85 per cent. of the difference between 15 per cent. and 25 per cent. of eligible cost increases would be covered by the Government.

Mr. Higgins: This is a rather complicated matter. Does the hon. Gentleman say that the option will be at the beginning of the manufacturing period or at the end? In short, is he saying that the manufacturer may take a different view of the expected rate of inflation from the Government?

Mr. Deakins: The manufacturer may well take a different view of the percentages that will have to be entered into at the time of entering into the arrangements with ECGD—in other words, at the beginning of the manufacturing period.

Mr. Peter Viggers: There appears to be an anomaly, in that in Clause 1(1 )(a) there is a reference to persons who have entered into export contracts. That wording does not appear in the 1968 Act. There seems to be an implication that customers must have entered into export contracts, whereas the 1968 Act and previous Acts relate to people carrying on business. Is there an implication that this is a different formula, or that this type of export credit guarantee can be given only after the contract has been entered into?

Mr. Deakins: The arrangements will be discussed between ECGD and the exporter at the time when the exporter is considering entering into an export contract in an overseas market. He will obviously want to know roughly what sort of support he is likely to be able to receive, and whether any contract he enters into will be eligible under this legislation. It will have to be done at the time when he enters into the contract, because the arrangements must apply for the purpose of furthering trade and exports. If an exporter has entered into a contract already there is no incentive to furtherance of trade in subsidising him, if that is what we are doing as a result of the introduction of this mechanism. It is only if this will make a difference that we shall be furthering trade.

Mr. Viggers: I completely agree that that is what one would logically expect. I am only surprised that the Bill is not worded in that way.

Mr. Deakins: I assure the hon. Gentleman that that is the intention. Perhaps I may return to the point later if there is still doubt about it.
In the individual contract, the escalation cover will relate solely to net increases in the amounts of the specific categories of variable United Kingdom costs which right at the outset have been identified by the exporter and accepted by ECGD. These categories are, essentially, his raw materials, components and labour costs. It will not cover his profits. The maximum rate of cost increases which can be covered under the scheme must be verifiable against some generally accepted independent index or formulae. Where in a particular trade it is the usual practice to base cost escalation clauses in contracts upon some well established and representative market indices, ECGD will normally expect to follow that practice although it would wish to satisfy itself that to do so would conform to the principles of the scheme. In other cases it may be necessary to use the Government's own published indices of movements in materials and wage costs for the industrial sector in question. However, whatever the precise index used in the individual contract, the exporter will not be able to claim more than the rise shown by that index, even though his own costs on that particular contract may actually have risen faster. Furthermore, if his own costs rise by less than the index, his entitlement will be limited to that lesser amount as evidenced by independent certification.
In this connection, I should make it clear that it would not be possible for ECGD to vet each case in fine detail without setting up a small army of inspectors, whose activities could be guaranteed to increase industry's costs still further. However, the Department will have the right to check, which it intends to exercise in a proportion of all cases as well as whenever it considers it necessary in a specific case. There is certainly no question of exporters writing in whatever cost increases they please. Because they will be meeting 15 per cent. of cost increases within the band of cover they will in fact have an incentive to hold their costs below the index level. Settlement will normally be made at the end of the manufacturing period, when it is clear how their costs have actually risen.

Mr. John Stanley: I understand the Minister to say that the responsibility for vetting what are the bona fide cost increases lies with the


ECGD, but I understood him to say earlier that it is not necessary to have an ECGD credit in order to be able to qualify for this particular piece of export benefit. In the case of an exporter who has not got export credit, who does the vetting?

Mr. Deakins: It would certainly still have to be the ECGD, because the exporter would be entering into a separate arrangement with ECGD. Even if he is not making use of any ECGD facilities in any other respect, he would be making use of them in this respect if he wished to take advantage of this cost escalation scheme. As public expenditure is involved, it is only right and proper that there should be some check, and we believe that the ECGD, with its widespread knowledge and contact with industry, is the most appropriate and the best body to do this.
Subsection (2) provides that the arrangements may contain such terms and conditions as the Secretary of State thinks fit. This follows similar provisions in relation to loans and grants in Clause 1(3). This subsection also empowers the inclusion in the arrangements of provisions requiring payments as consideration for entering into the arrangements. This will enable a premium to be charged for these facilities.
A flat-rate premium will be payable. It will be calculated by reference to the manufacturing period of the individual contract. At the end of the day, the net cost of operating the scheme will turn on how much industry's costs do in fact escalate over the next few years, the form of cover taken by exporters and, above all, on the success of the scheme in encouraging additional exports. However, it would be quite wrong to pretend that the scheme can in any sense be operated on a self-balancing insurance basis. It would, for example, be not only difficult but counter-productive and therefore most unwise to try to balance expenditure by making exporters pay ECGD if their costs proved to be lower than expected. In financial terms, therefore, this is essentially a one-way scheme. For this reason, it will be accounted for quite separately from ECGD's other operations. Payments under it will not, therefore, affect

ECGD's reserves or the premiums which the users of its other facilities have to pay.
Subsection (3) contains the normal financial provisions. Expenses incurred in connection with the arrangements are to be defrayed out of moneys provided by Parliament while sums received, for example, premiums, are to be paid into the Consolidated Fund. This provides Parliament with control over the moneys since such moneys will have to be voted.
Subsection (4) provides that no arrangements shall be made after the expiry of two years from the date when the Bill becomes law.

Mr. Higgins: The hon. Member is raising so many points that they could be embodied in a completely separate Bill. He is saying that this is not an insurance scheme at all. If so, why did the Secretary of State for Trade say in his statement :
A Government amendment will accordingly be introduced to the Export Guarantees (Amendment) Bill to give the Export Credits Guarantee Department the necessary powers partially to insure exporters against a higher than expected rate of inflation."—[Official Report, 20th Feb. 1975 ; Vol. 886, c. 1566.]
The Minister has just said that it is not an insurance scheme at all. Further, he is saying that a premium will be charged. There must be some Government expectation as to what the rate of inflation will be over 10 per cent.

Mr. Deakins: An insurance scheme involves some sort of spread of risk. There is no spread of risk in present and foreseeable circumstances. In other words, if inflation went down to a minus level, there might be a spread of risk and if the scheme were self-balancing in that way, with exporters paying if the rate of inflation was below zero—a negative rate —the Government would benefit. We cannot operate the scheme on that basis because it is obviously not within the bounds of practical possibility. The hon. Gentleman's second point was on premiums—

Mr. Higgins: I still do not understand why the Secretary of State referred to it as insurance. It is not insurance. My second point was simply that the Minister says that there is to be a premium. That must, presumably, be related to some estimate by ECGD or the Government of


the risk involved, which in turn involves some assumption about the rate of inflation. What rate of inflation is being assumed?

Mr. Deakins: Dealing with the hon. Gentleman's first point, my right hon. Friend was using the word "insure" in a different way from that in which the hon. Gentleman uses it in referring to an insurance scheme. Someone can be insured against the possibility of something happening, which is what the scheme does. We are ensuring that exporters will not have to meet all the extra costs as a result of an excessive or particularly high rate of inflation over the next few years. My right hon. Friend was correct to use the word "insure ". It is not an insurance scheme in the actuarial sense of the term—which I think was the way in which the hon. Gentleman was using it—whereby there is a balance of risk as between the party who is being insured and the insurer, with the insured paying an annual premium against some risk, such as burglary or the loss of his car. Here the risks are all one-way.
The lion. Gentleman's second point concerned the premium. That will not be related to an assessment of the payout under the scheme. It will have to be related partly to the exporter's liability and partly to the costs of operating the scheme. We want to ensure that the ECGD is not out of pocket on its administration. It may be necessary to take on a few extra staff to deal with the checking that may be involved from time to time. Therefore, the premium will basically relate, not to the scheme as an insurance scheme, but to ECGD administration costs.
I have said that the flat-rate premium will be calculated by reference to the manufacturing period and that the scheme cannot be self-balancing. I have pointed out that the scheme could come to an end after two years, and we make it clear in subsection (4) that that is our intention. Subsection (5) enables the Secretary of State to extend this period by not more than one year at a time by order. This arrangement will, of course, enable Parliament to debate any extension of the scheme which might be proposed at the end of the initial two-year period and subsequently.
The other amendments are minor and consequential, with the exception of the new Government amendment providing that these arrangements may be made in respect of contracts signed on or after 20th February.
An essential feature of the scheme is to get it off the ground at the earliest possible date. It was, therefore, highly desirable for ECGD to give exporters as from 20th February, the date of my right hon. Friend's statement, some undertaking that—subject of course, to the obtaining of the necessary legislative powers—cover would be available in respect of contracts signed after 20th February but prior to the passing of the legislation. This new amendment will enable ECGD to undertake, before the Bill becomes law, that it will enter into cost escalation arrangements if and when it becomes law. This will cut out delay in assisting exporters, and therefore avoid the risk that valuable export orders might be lost pending the Bill's enactment. Exporters can accordingly make their export contracts in the knowledge that, subject to the passage of the legislation and to their compliance with the requirements of the scheme, they will in due course receive cost escalation protection from ECGD.
With this aim in mind, ECGD began receiving applications immediately after my right hon. Friend's statement: but the tailoring of the scheme to each individual case will take a little while to work through. For example, the applicant has first to furnish a fair amount of detail about the cost components of the tender. Any commitment by ECGD to disburse funds must of course be conditional upon the passing of the legislation now before us ; but, subject to that, detailed negotiations can usefully proceed meanwhile.
Like the schemes operated by the French and the Italians, the arrangements will not be available for exports to other EEC markets.
We regard the scheme as an important development. It is designed to reduce an unpredictable risk and in a way which will share the costs and benefits between exporters, buyers and the scheme. It represents a positive response to representations made by industry.

10.45 p.m.

Mr. Tim Renton: The Under Secretary of State for Trade, with his usual panache, took us with almost breathtaking speed through a very complicated new clause. Indeed the provision is so complicated and such a departure from traditional ECGD practice that, as my hon. Friend the Member for Worthing (Mr. Higgins) said, it justifies a Bill to itself.
The Minister made two specific comments that caused me some concern. He said that the precise details of the new cover were being drawn up at present, yet, as he also said, the possibility of providing a cost escalation cover has been mooted for a long time. I should have thought it better for the cover to have been drawn up more precisely within the ECGD Department before the details or the bare bones of the scheme were publicly announced, otherwise there is a danger of confusion in people's minds, with exporters queueing at the gates of the ECGD without the ECGD knowing fully whether those exporters will qualify. In this case a little less haste and more precision would have been advisable.
The Minister in describing the cost escalation cover said that the risks were all one way. I do not think that is so. I understand that the premium is to be 1 per cent. and as the cover is for a tranche of 10 per cent. inflation per annum, it is a one-in-ten shot as to whether one will make on the policy or lose on it. But this is far from being an insurance cover as such. It will end up as being a subsidy to British exporters with major contracts. It is far better we should recognise it and call it that.
Against that background, I give a general welcome to the scheme. It is a new departure for ECGD and it is right that it should be treated carefully. In the past, as the Minister said, ECGD has run its books as a mutual insurance operation. Effectively, the underwriting operations paid for themselves, taking one year with another. To use the popular jargon, they washed their face. They have done so with increasing success in past years. In the financial year 1973–74 the credit insurance scheme produced a net transfer to revenue account of £24 million. This was by far the highest figure that ECGD had ever achieved. I understand that the

figure may well be increased in the present financial year, due particularly to the cash flow from buyer credit. It would be right for this addition to the revenue account of ECGD to be used to reduce the premiums paid by the ordinary exporter in this country, so that the benefit of the underwriting success of ECGD—let us treat it as such—should be used to bring down the cost of insuring for the whole range of exporters from this country. This would have the effect of increasing the attractiveness of ECGD and seeing that a higher percentage of British exports follow through the Department than is the case at present.
I was very pleased to hear the Under-Secretary say categorically that the cost of this new cost escalation cover would not fall on the shoulders of the average exporter and that it would be treated as a separate item, or, to put it the other way round, the revenue surplus of ECGD would not be all used to subsidise the cost of this new scheme. I think that is most important, because if the underwriting profits of ECGD—those that ECGD achieves through good underwriting throughout the world—were absorbed in the cost of the new scheme, that would be detrimental to the general run of exporters and would have a bad effect on the management of ECGD which prides itself on obtaining an overall profit while at the same time trying to bring premiums down.
I should like to ask a few specific questions which I hope the Under-Secretary will answer at the end of this debate on the new clause. I hope he will be able to tell us—and this takes up a point raised by my hon. Friend the Member for Worthing (Mr. Higgins)—based on the average inflation rate in the last two years, what he expects the likely annual cost of this scheme to be. I realise that the Secretary of State for Trade, in introducing this new scheme on 20th February, refused to do this. He said it was impossible. But at that time I think he was casting forward.
I am sure that on an extrapolation of inflation rates over the last two years, some estimate of cost must be available. I think it should be declared because it has been the custom in the past with ECGD that whenever it has got involved in a new form of expenditure an estimate


has been given. For example, when the refinancing scheme started there was an estimate of total sums involved likely to reach £350 million.
Then on the question of control, it seems to me that this will need very careful control indeed. It is a new departure for ECGD. It will involve ECGD in monitoring the costs of major British exporters. Is ECGD properly staffed to handle this? How many new staff will it require? I should have thought, at a rough guess, that it could lead to a doubling of ECGD staff if they are to become involved in a careful analysis of the costs that a number of exporters will claim under this cover.
The Under-Secretary referred to using Government indices for wages and raw materials and an independent certification of costs that exporting companies will claim. But, obviously, this will call for a great deal of checking, and I should like to be assured that the question of cost and the number of staff involved has been thoroughly thought through by the Department.
I turn now to our amendments to the new clause. In tabling Amendment (a), we sought to bring into the category of those who could claim relief under the cost escalation clause such companies as plant designers, engineering consultants and those specifically involved in exporting not their goods but their skills and technology. The Secretary of State for Trade, when introducing the scheme, spoke of its particular importance in such markets as the Middle East, and it is in just such markets that designers and consultants are involved, exporting traditional skills and new technologies from this country. I noted that the Under-Secretary said that production line goods were excluded. I know that some of my hon. Friends will wish to speak about that, and I shall not anticipate their remarks.
Amendment (b), in my name only, suggests that increases in interest costs should be excluded. I had two specific purposes in view here. First, I had it in mind that progress escalation payments should be made to the manufacturer during the course of the four or five-year contract. Plainly, if his claim for money due because of inflation was met by payments made in that way, there would be

no interest accruing, and that would serve the purpose of my amendment. I understood the Under-Secretary to say that such progress payments would not in fact be made, and that payment would be made only at the end of the contractual period.

Mr. Deakins: I said that they would not normally be made. But, of course, there may be exceptional circumstances in which there is a very long gap between entry into the contract and actual delivery and final payment at the other end, and in such circumstances we may have to look at it again. In normal circumstances. however, what I said applies.

Mr. Renton: I am grateful for that assurance. In my view, the net should be widened somewhat, because there must be cases in which, for cash flow reasons, unless they can count on getting these payments during the course of the contract, exporters will be put off entering into a contract or tendering for it at all.
My second purpose in Amendment (b) concerned the question of the interest rate on money that the exporter would pay in the United Kingdom during the period of the contract. Someone bidding for a major overseas contract inevitably takes a view of what his United Kingdom cost of money will be. That view may be right or wrong. It is arguable that, because Government policies have the greatest effect on the cost of money—just as they do under this Government on wage rates—a case can be made that an increase in the cost of money in the United Kingdom should be covered under the cost escalation policy.
On balance, however, I think that that would be wrong, because one has to take a view when bidding for a contract. If one's view is wrong, one may then argue with the ECGD that it should help effectively to bail one out, whereas, in fact, it has been a matter of judgment at the time of bidding for the contract. I feel that the exporter's judgment on the question of the interest rate applicable in the United Kingdom should stand. I would appreciate hearing the Under-Secretary's thoughts on that point.

11.0 p.m.

Our Amendment (c) has already been dealt with by the Under-Secretary. He said that the sums involved in the new cost escalation cover would be separately


treated and identified in the accounts of the ECGD, and that is absolutely right. I hope that he will therefore accept our amendment.

Our Amendment (d) follows very much from the tabling of the new clause. We are seeking to limit the number of annual orders by which this scheme can be extended to five, and that is in line with the Under-Secretary's comments when he said that this was a new scheme. We shall all have to wait to see how it works, and therefore it is appropriate that the number of extensions should be limited to five. It seemed an appropriate number because the Under-Secretary said on Second Reading that the limits in the Bill would be adequate for approximately the next five years. It seems correct to tic in the number of annual orders to the same period.

Our final amendment refers again to the Government's new clause. We accept that contracts signed after 20th February but before the Bill becomes law should qualify for the new cover and that the increases in costs experienced by exporters within that time should fall within the scope of the scheme. We believe it is important that it should be limited to increases in costs which take place after 20th February, however.

Government Amendment No. 11 is loosely and poorly worded and it would be better if this were made clearer and more precise by the addition of the words
 subsequent to 20th February 1975 ".
Under that proposal increases before that date cannot be compensated for under the cost escalation cover. These are serious and valid points and I am sure the Government will consider them with care.

Mr. John Cope: I share the reservations which the Under-Secretary seemed to be expressing about the need to introduce the new clause. It is not insurance in any of the normally understood uses of that word and it is, as he said, essentially loss making. That applies, however, on the assumption which he expressed that a mere 10 per cent. inflation is, I think he said "outside the bounds of possibility ". Some of the electorate were led to believe that a rate of inflation of less than 10 per cent.—I believe 8·.4 per cent. was the figure given—might have been possible.

That now seems to be outside the bounds of possibility. I do not disagree, but it is interesting that the Government should now take that view and make provision accordingly in the new clause.
That approach was confirmed because it was openly stated that the risks were to be all one way. I have these reservations about the new clause, but I also accept that other countries, particularly the French are making these sort of provisions. I accept that as the Government and their predecessors have been unable to persuade the French not to do this kind of thing we must introduce a similar scheme ourselves.
My main reason for intervening is to query the use of the words "capital expenditure ". The Under-Secretary of State used them this evening and the Secretary of State used them in February. I appreciate that the clause is essentially permissive in the way in which it is drawn. It is not confined to capital expenditure. It is not really confined in any other way. Nevertheless, the Under-Secretary of State has made it clear, as did his right hon. Friend, that the help given under the clause will be restricted as to amount—namely, £2 million—on an individual contract and to a minimum length of time—namely, two years. I accept those restrictions, but why the further restriction on capital goods?
I raise that point because of a constituency interest. I received a letter this morning from the managing director of the Guided Weapons Division of the British Aircraft Corporation. The corporation has a considerable factory in my constituency as well as elsewhere. Since the Secretary of State's announcement the corporation has been discussing with the Department, and through its trade association, the sort of contracts which will qualify. It finds that what are, in the managing director's phrase, loosely described as capital items are to be the only items that will qualify. That loose description is the phrase used by the Under-Secretary of State this evening. They are not, as I understand it, the only goods that qualify under the French scheme, for example. I do not have detailed information about the Italian scheme.
However, there is a real difficulty. I shall read a short extract from the letter


that I received from the managing director of the Guided Weapons Division. It reads:
 In these respects a £50 million contract to supply a quantity of Rapier Fire Units and missiles to an overseas customer is no different from a 150 million contract to supply a nuclear power station, which would be regarded, I understand, as a `capital contract' and thus qualifying.
Earlier the letter reads:
Unfortunately, we find in discussions between Trade Associations and officials, that it is the intention to restrict this facility to what are loosely described as ' capital items'
…
In the letter it is pointed out that contracts involving "production runs" are not provided for in that context. The £50 million contract for Rapier fire units and missiles obviously involves a certain element of production runs although it is a very large contract. The letter continues:
 Our competitors in France manufacturing guided weapons do have available to them schemes having some similarity to the British scheme.
He argues—and there is a lot of strength in his argument—that large contracts even in the nature of revenue items should receive the same assistance as capital items. It seems that to do otherwise implies that there is something more desirable in capital exports than exports of revenue type goods. I do not see that there is an essential difference. I do not think that an essential difference should be incorporated in the regulations—I know that it is not proposed to incorporate it in the clause—adopted under the clause by the ECGD and by the Department of Trade. It is proposed that only capital items should benefit. That seems to me to be a mistake.

Mr. Stanley: I welcomed the introduction of the scheme in principle so I am not in the best position to express strong reservations about it, but I will refer to three.
One of the possible dangers of introducing such a scheme is that it will trigger off retaliatory action internationally, and that has possibly already happened. Does the Under-Secretary of State think it coincidental that within seven days of the announcement of the scheme in the House the Exim Bank announced, on 27th February, a further improvement of its scheme, and that the

Press release specifically referred to the need to meet competition? By taking action which is overtly of a subsidy nature there is a danger of triggering off retaliatory action which could be counterproductive and endanger British exporters.
I warmly support my hon. Friend the Member for Mid-Sussex (Mr. Renton) in drawing attention to the absence of any estimate of the cost of the scheme over the next two years. It is essential that the Minister should give the House some indication of the cost, because the commitment is open-ended. It depends on estimates of likely rates of inflation and the extent of the take-up of the scheme. We may be talking about a very substantial sum, and it is incumbent on the Minister to say what is the Government's thinking on the public expenditure implications of the proposal.
If the proposal had been introduced when the Bill was initially drafted the public expenditure implication would have had to appear in the explanatory memorandum. The Government should not be able to avoid their obligations to tell the House what will be the cost merely because the scheme has been introduced on Report.
I also express concern about the parliamentary accountability aspects of the scheme. I understand that the legal position is that a highly generalised power is being given to the Secretary of State to enter into arrangements with individual companies which will effectively increase their profitability on individual contracts. Under the new clause the Secretary of State has complete freedom to regard as allowable costs—
 such increases in the cost of labour, materials or other matters as may be specified by or under the arrangements.
Those arrangements are entered into solely between the Secretary of State and individual companies. Legally, Parliament will give the Secretary of State the ability to make almost any cost allowable as to between 100 per cent. and 85 per cent. for reimbursement. In financial terms we are offering something which is more generous than tax allowability.
When one contrasts the position under the Finance Acts, where income tax and corporation tax are concerned, which define in detail what is allowable and not


allowable for tax purposes, with this highly generalised statement which financially has an even more beneficial effect than tax allowability, one cannot help but notice the inconsistency. If the clause is passed without greater definition, we shall be failing in our obligation to make this public expenditure properly accountable to Parliament.

Mr. Geoffrey Pattie: I welcome the changes embodied in the clause, but I deplore the way in which the House first learned of them. I do not wish to comment on the practice of Ministers in successive Governments making announcements to the Press, but what happened here was a leak which occurred while the Committee was sitting. It was unfortunate that members of the Committee had to read about the proposals in the columns of the national Press.

11.15 p.m.

My hon Friend the Member for Ton-bridge and Malling (Mr. Stanley) has referred to the dangers of retalitatory action, and it is right and proper that he should, but I have always found it rather tedious that it seems that the French are always able to give beneficial and advantageous terms to their exporters but that the danger of retalitatory action is always used as a reason why we must never jump in and follow. Obviously there is a risk which must be carefully balanced.

These proposals in themselves are not going to usher in a golden age for British exports because the key word in exports is reliability and that means reliability in delivery and in performance. If we do not have those twin reliabilities, we never get to the stage when we are in the final negotiations and finance is the critical element.

I have no doubt that there are many situations where it is essential to have the same room for manoeuvre which is available to our foreign competitors. I therefore welcome these provisions to counter cost escalation and also the provision for performance bonds with certain limits, but my biggest welcome is for the attitude which this clause reveals: it seems to be recognizing the hard fact of exporting life, that there are no prizes for the runner up. One either gets the contract or one does not.

It seems also to represent a move in the direction of getting business for this country and away from a particular sort of commercial purism which is only too ready to ignore employment considerations for British industry, import substitution considerations and considerations relating to what is often referred to as an expansion from a commercial bridgehead. To make such an extension. it is useful to have the commercial bridgehead there in the first place.

Finally, I should like to follow up the point made by my hon. Friend the Member for Gloucestershire, South (Mr. Cope) when he referred to the Guided Weapons Division of the British Aircraft Corporation. I should like to refer to the manufacture of aircraft and to ask, in the words of the Under-Secretary, about production-line goods because aircraft are made on a production line. They are extremely expensive items and I would have thought quite essentially the sort of thing we should be exporting. It is initially a low-cost item which has added value put on it by British skill and technology and ends up as a high-cost export item.

It is a production-line creation. Are aircraft to be specifically excluded from these provisions because of the way they happen to be built? I should like the Under-Secretary to answer that question.

Mr. Anthony Nelson: I had not intended to contribute to this debate and I rise with some trepidation because I was not a member of the Standing Committee and I am sad to admit that I was also not present during Second Reading.
At a cursory glance I am very concerned to see the figures of £12,200 million and £3 billion in the Bill. There is no excuse then for a Member of Parliament not listening, commenting and trying to contribute to the debate.
This immense sum is a potential liability to the hard-pressed taxpayers, and not least to those in the worthy constituency of Chichester, but I recognise that the benefits of the Bill will accrue to many of the industries, particularly the light industries in the Chichester district, increasing exports to the Continent, and that they will benefit considerably from this sort of provision.
I should like also to sound a grave note of caution, that there has been a great deal of talk about the provisions of this new clause providing a counter to cost increase. It provides no such thing. What they provide for is to pay for the cost increases, and the biggest question is whether it is a proper expenditure to pass on these cost increases to the taxpayer, through whatever system.
I recognise that the question which must then be asked is whether the benefit through such encouragement of potential exports outweighs the liability which accrues to our taxpayers as a whole. The probable answer in this case is that it does, but I believe that such provisions and guarantees should be subjected to the most stringent restraint in terms of overall liability.
I endorse the comments of my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) in seeking clarification of the total amount payable under this provision. Secondly, we have heard a good deal of discussion, perhaps semantic discussion, about the difference between subsidy and insurance.
I accept the Under-Secretary's explanation of the disparity in the statements made on this previously, but it would be better if administrative and other costs were included in the potential liability under this clause. In other words, the cover granted should perhaps be that much less than it would otherwise be, the difference between the amount suggested and the amount to which it could be reduced being that which is currently payable under the clause in terms of a premium. This would seem much neater, and it would get over what is a disguised subsidy. I believe that it should be clear for people to understand exactly what it is, and that it should also be quantified in terms of a subsidy and not in terms of an insurance.
I seek some greater clarification oil Amendment No. 11. I endorse what has been said to the extent that this seems an open-ended commitment to provide that the clause shall be applicable to cost increases before 20th February of this year. This seems to be like insuring a house once it has burned down. It is quite different to guarantee cover for potential or likely cost increases where a risk is undertaken. But this amendment implies

that cost increases which have occurred already and are quantified will be allowed to be covered by the provisions of the clause. This is a complete departure from the intention of the clause and will enable unfair competition on quite a relevant scale.
I want to sound a note of general caution. In the past few weeks in a variety of different spheres—in fisheries, in agriculture and, especially in my constituency, in horticulture—there have been increasing calls for subsidies of one kind or another. We also hear increased calls for import controls. We have heard raised this evening the question of retaliation. This is very dangerous talk. We must guard against the possibility of starting some sort of subsidy war which will help none of us. I say no more about that. I am sure that it is a subject on which there will be a great deal of comment. But it is relevant to some of the technical provisions contained in the clause.

Mr. Viggers: I want to mention three points. First, I must pursue the boring technical drafting point on the new clause.
Section 1 of the Export Guarantees Act 1968 provides that
 the Board of Trade may with the consent of the Treasury make arrangements for giving such guarantees to, or for the benefit of, persons carrying on business in the United Kingdom.
Section 2 provides that
 the Board of Trade may with the consent of the Treasury make arrangements for giving such guarantees to, or for the benefit of, persons carrying on business in the United Kingdom ".
In both instances there is an assumption that people are carrying on business and that the export credit guarantee is to be given for the purpose of enabling them to carry on such business.
The new clause begins with the words:
 For the purpose of encouraging trade with other countries, the Secretary of State may with the consent of the Treasury make arrangements for making payments to persons carrying on business in the United Kingdom.who have entered into export contracts ".
The use of the past tense, which was not used in the previous Act, must be explained. I am sure that the Under-Secretary agrees that the purpose of the new clause is to enable people to enter into export contracts. However, that is


not what the Bill states. If the Bill does not make that clear, there is a grave danger that this House may pass into law something which will mislead generations of businessmen.
Secondly, this may seem a sad day for British trade because we are beating our ploughshares into swords, our pruning hooks into spears and clearing the decks for action for a credit war. We must ask for an assurance that every step is being taken internationally to reduce credit subsidy and that the Government are in touch with other Governments to ensure that appropriate steps are taken, perhaps through the setting up of an international conference, to see that we are not triggering off a credit war. This is a critically important matter. The new clause might, as has been said, appropriately form a new Bill. If we are asked to incorporate the new clause into the Bill, which has been given consideration in Committee and elsewhere, we must have that form of assurance.
Thirdly, it would be inappropriate for this discussion to pass without attention being drawn to the great crime of our time—inflation. The new clause is like feeding aspirin to a dodo unless we can find a way to tackle inflation. To make a cheap, but important, political point, inflation must be tackled. It is not good enough to use inflation as a weapon, as accuse the Government of using it. It is not good enough to allow inflation to redistribute assets, wealth and incomes. The real problem to be tackled is inflation. The new clause merely provides a palliative to deal with one aspect of inflation—that concerned in international trade. We want a Government who are prepared to tackle inflation.

Mr. Higgins: I could not agree more strongly with what my hon. Friend the Member for Gosport (Mr. Viggers) said about the need to control inflation. Indeed, when the Secretary of State for Trade made his statement on 20th February I pointed out that compensation for the effects of inflation on exports is a poor substitute for beating inflation.
It is important to stress that many people in industry in this country would like the same degree of protection against inflation as that that the Government

propose to give to those in other countries under the provisions of the new clause.
I should like to take up the point made by the Under-Secretary of State about insurance. It seems quite fantastic for the Secretary of State for Trade to come to this House and, in the statement to which I have referred, clearly state that it was a scheme for insuring things—an insurance scheme—and for the Under-Secretary tonight to say that it is not an insurance scheme at all. This is what we have from two Ministers who have prime responsibility for the insurance industry and are proposing to introduce legislation to deal with insurance companies which get into difficulties. It seems clear that the Secretary of State for Trade has not the remotest idea what is and what is not insurance.
I should like to take up a number of important points that have been made by my hon. Friends and to emphasise that we expect clear answers to them from the Minister. Although we are debating this important measure late at night, it is important that we get clear replies.

11.30 p.m.

My hon. Friend the Member for Gosport compared the wording of the new clause with that of previous legislation. The Minister said that there was no intention that the effect should be different, but the Government's intention is in no way relevant to what the courts may decide to be the meaning of the words. I should like a clear answer on this subject. The Government's hope may turn out to be a disappointed hope if the wording is not correct.

We have before us this evening a Bill as amended by Standing Committee D, but the new clause does not have an explanatory and financial memorandum, as when a Bill comes to the House for Second Reading. Yet it is clear that the consequences of the new clause will significantly change the financial effects of the Bill. It may be a convention of the House that hon. Members are expected to know what has happened between Second Reading and the next stage when the Bill is considered on the Floor of the House, but that does not apply in this case and the House should be given the Minister's best estimate of the likely cost of the new clause. Estimates may be


difficult to make, but they are important in this context.

My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that the new clause might involve a doubling of the staff of the ECGD. This new clause could well have formed a Bill on its own, and it is essential that we have a clear statement of the Minister's expectation of the increase in the number of staff in the ECGD and his own Department if the House agrees to the new clause.

Mr. Deakins: The hon. Gentleman implies that there might be a vote on the new clause. I hope that he will think seriously about what he has just said. I could, but will not, quote the representations that we have had from British industry throughout the country asking for a step such as this. It is most ungenerous of the hon. Gentleman and politically unwise to suggest in the form of a threat that action will be taken this evening to stop the clause from going through.

Mr. Higgins: The hon. Member must not be so sensitive. Whether my hon. Friends decide to vote on the clause is a matter for them.
The point that I am making is that we expect to have proper answers when Government expenditure of this kind is being considered. Whether or not there have been representations and discussions, the Minister must not assume that that exonerates him from giving the House sufficient information to make a decision in these matters.

Mr. Deakins: I am not suggesting that.

Mr. Higgins: I make it absolutely clear that we expect an answer on this subject.
Neither the Bill nor the new clause imposes a limit on the size of the contract charge covered by these arrangements, but our understanding from the Secretary of State's statement is that the limit will be £2 million and that contracts of less than that figure will not be covered. My hon. Friend the Member for Gloucestershire, South (Mr. Cope) stressed the importance of this measure to his constituents and my hon. Friend the Member for Gosport emphasised that there were many people in the export business throughout the country who would like the protection

offered by the new clause. That we accept, but we are not clear why the Government feel that there should be a cut-off point of £2 million. Why are exports of a production line type not to be covered? I mentioned that in the Second Reading debate. I do not feel that the Minister has spelled this out in sufficient detail, and many of my hon. Friends are concerned about the point.
I now turn to a different aspect of the matter. We have agreed throughout with the Minister that the degree of support for exports must be related to the cost. It is also true that the cost must be related to the return to the economy. I think that that is common ground between the Under-Secretary and myself and, I imagine, the whole House. It has been made clear by the Secretary of State for Trade and the Prime Minister himself that one of the main purposes of the clause is to facilitate exports to Iran and, following the Prime Minister's visit, to the Soviet Union.
Now that all the hullabaloo about the Prime Minister's visit has died down we are still unclear what the value of the export credit terms will be. Cmnd. 5924 is a lengthy document, which gives some indication of the situation and refers in particular to the credit terms, saying that they shall be the most favourable terms possible. We must consider whether the terms are not so favourable that the gain to the British economy is debatable. I shall be grateful if the Minister will clarify precisely what the terms are. They are not clear from the Cmnd. Paper.
I understand that the rate of interest, as with other exports, is to be 7·25 per cent. I believe that that is the figure that has been mentioned. In addition, exports to the Soviet Union are to be protected against cost escalation. We also understand—it has been mentioned in an article in the Financial Times, and it was referred to in an after-dinner speech by the Prime Minister a short time ago —that there are to be certain provisions with regard to exchange rates.
If an export is made to the Soviet Union under the new clause, what will be the position if the sterling exchange rate declines in terms of the Soviet Union or some other currency? Will the Soviet Union be protected against that as well? That will be to its advantage in those circumstances.
Taking all those three components together, it seems to me that the advantage we are offering to countries to which we export is likely more than to offset the profit margin. It is not just a question of turnover. It generates employment, but so does making things and giving them away. It is the profit margin that is important.

Mr. Deakins: And jobs.

Mr. Higgins: Certainly, jobs. But it is no good having jobs if we are going to give our resources to other people for nothing.
The clause has been related by the Secretary of State and the Prime Minister to the question of exports, following the visit of the Prime Minister to the Soviet Union between 13th and 17th February. Under the new clause and under the preferential interest rate agreements—and also in terms of the exchange rate—those who are investing in the Soviet Union or elsewhere are in an advantageous position as compared with people investing in this country, in terms of real assets. People investing in this country do not get the benefit of low interest rates, or protection against inflation.
The document to which I have referred, reporting the Prime Minister's visit, refers to a two-way exchange of goods as listed in Annex I. For instance, there will be the
Supply of equipment for projects of the oil refining and petrochemical industries.
That is in the United Kingdom. In the Soviet Union there will be the
Supply of equipment for enterprises in the chemical, oil refining and petrochemical industries ….
May we have a statement from the Minister explaining whether the credit terms given to people in this country will be the same as, or more or less favourable than. those which we propose to give to the Soviet Union under the clause?
I turn to the main point which has been made on the insurance scheme. It now appears that it is not an insurance scheme at all. Clearly, what the Government propose is simply to make a charge for the costs which are likely to be incurred as a result of the scheme being operated by the ECGD. I understand that no insurance premium in any sense is to be charged. The hon. Gentleman said that those taking advantage of the

arrangements which the Government propose would simply incur the costs of operating the scheme.
Fundamentally, the scheme is simply a palliative. It is important if we are to remain competitve. It is also important that we should continue to avoid a credit war, and that we should continue the negotiations so far unsuccessfully carried out by the Government to prevent a further increase in credit term competition. If it happens, there will be transfers of assets from this country and others which may well work out, net, to our disadvantage.
Overall, this is not something which can be ignored in the present situation, in which the Government apparently propose to cover inflation over a 10 per cent. rate, when the present rate is about 20 per cent. What is the Government's expectation? Is the Minister seriously saying that it is thought that the rate of inflation will be 10 per cent. over the next year? That appears to be what the Government are saying, because the clause purports to cover risks of a rate of inflation over that expected and the floor is put at 10 per cent.

Mr. Deakins: I have not kept an exact count of the number of questions put to me, but I shall do my best to reply to them all.
In the staffing of the ECGD, we must strike a balance between inserting into industry an army of ECGD inspectors and vetters and the need for proper control over public expenditure. We intend to get the balance right, and to keep our increases in staff and costs to a minimum, consonant with our need to ensure that public expenditure is safeguarded.
The hon. Member for Mid-Sussex (Mr. Renton) asked about the surplus in our accounts, and the effect it might have on the premium. The surplus shown in the accounts represents to a considerable extent premiums received and held by ECGD against risks which will continue under medium-term and long-term credit for a number of years, so the surplus is not a ground for reducing premiums in the short term or for reducing current premiums.
The cost to public funds will depend on the form of cover taken by the exporter, rates of inflation and the level of our


exports. In a direct sense, the eventual cost of the scheme will be related to its success in meeting its major objective of enabling United Kingdom exporters to obtain contracts abroad that they would not otherwise have obtained. Therefore, it is difficult to make a realistic estimate of the likely cost. No payments will be made until the end of the manufacturing period, and as the minimum qualifying manufacturing period is two years no payments will be made from public funds until the financial year 1977–78. In the meantime, we shall be acquiring premiums which will more than cover ECGD's costs in running the scheme.

Mr. Higgins: On what basis will the surplus be decided? If it is to be more than the costs of running the scheme, how will the Government decide how much more they should charge?

Mr. Deakins: The Government have decided provisionally that the charge shall be 1 per cent. Obviously, in the light of circumstances and experience of this scheme, which as everyone has recognised is completely new, we may have to make adjustments upwards or downwards. But at least we think that 1 per cent, is setting the level as realistically and fairly as possible in the interests of exporters, the ECGD and public expenditure considerations, bearing in mind that we have had no experience of operating such a scheme.

11.45 p.m.

Mr. Tim Reaton: How can the Under-Secretary decide that 1 per cent, is a realistic level at which to set the premium if he has no idea of the likely cost of the scheme? Furthermore, will he say whether the 1 per cent, also applies to the case scheme as well as to the forward schemes?

Mr. Deakins: Yes, the 1 per cent, applies to both schemes. We had to start somewhere, and we have to get some idea of what the cost might be to ECGD. We have obviously to take on some more staff in order to get the costs of particular firms. Much will depend on the use that is made by firms of this scheme. Some may think that it is not worth while ; others may not be eligible, and so on. The guidelines which we are intro-

ducing, the ground rules, could well be changed in the light of experience. This again might affect ECGD costs.

Mr. Cope: The hon. Gentleman seemed to come close to saying, before my hon. Friend the Member for Mid-Sussex (Mr. Renton) intervened, that because no actual cash would have to be paid out for two years, it did not much matter, in the sense that all that one was doing was entering into a commitment for the future and that that did not matter. While that seems to be in accordance with the general Treasury petty-cash accounting which is conventially follows, it does not seem very satisfactory from the point of view of control of public expenditure. Although the amount actually spent in the course of this scheme will depend on the factors which the Under-Secretary mentioned, it will depend primarily on the Treasury, because every arrangement entered into is with the consent of the Treasury. Has the Treasury any top figure in mind at which it will say, "No, that is enough ", or has it no idea of how far it is prepared to go in this matter?

Mr. Deakins: The prime purpose of this is to increase British exports of major capital goods. To the extent that we can do this without public expenditure running away with itself, we shall do so. If it were to be the case that the implications, because of either rising inflation or large numbers of contractors taking advantage of the scheme, were such that we decided to call a halt, obviously we should need to reconsider. But frankly, at this stage we feel that the variables are such over the next couple of years —the rate of inflation and the number of people who may take part in what is, after all, a very new scheme—that until we have seen some of the scheme in operation over the next year or two it is very difficult to make more than a wild guestimate "of the cost. That is why we have the two-year limitation. I hope that the hon. Gentleman takes that point. We have made it two years. We hope that in that time, by international agreement, we shall be able to ensure that other nations come into line in agreement with us, and that we shall get rid of cost escalation schemes altogether and work towards a period of credit peace, which we shall encourage.

Mr. Cope: I share that hope, but is it the case that the Treasury has no maximum in mind at present?

Mr. Deakins: The Treasury has a vague figure in mind.

Mr. Cope: What is it?

Mr. Deakins: I think one could say that the figure was entirely a "guestimate ". I do not want to be held to this in a year or two's time, or to have the Government held to it. I repeat that the variables are such that one would need a crystal ball almost to be certain of getting to the right figure. It is extremely difficult to make this kind of estimate. However, if the volume of business which we underwrote in 1974 through ECGD which met the guidelines were to be covered in future years by the scheme, at 1974 prices we estimate that the cost would be £50 million in the first year, 1977–78, and this could well rise thereafter.

Mr. Cope: Is that an estimate of what the cost might be and not a maximum showing where the Treasury will stop giving consent?

Mr. Deakins: Yes.
May I now deal with the amendments tabled by the hon. Member for Mid-Sussex. There were five altogether. Amendment (a) refers to design and consultancy services and research and development. It is our intention to allow United Kingdom services to be eligible for cost escalation cover where they are part of a capital goods contract which meets the guidelines. Contracts solely for United Kingdom services to an overseas buyer can also be considered, provided that they satisfy the access criteria and provided that we are satisfied that they are genuine and eligible United Kingdom services.
I do not rule out the possibility of including a limited amount of research and development for the specific purpose of fulfilling a particular contract covered under the scheme, although there are wide areas of research and development costs which would be inappropriate in a scheme of this nature. Genuine and eligible services are all adequately covered by the reference in the clause to "other matters ".
I turn now to amendment (b). I explained in my opening speech the broad areas of costs to which it is our intention that this scheme should apply. I also explained that the powers set out in the Government amendment had deliberately been drawn in a wide way to reflect the fact that the details of the scheme have not yet been fully and finally drawn up and—more important—to enable ECGD to react flexibly to changing circumstances.
There are certain elements of the contract price which we do not intend to include in the scheme, such as profits and foreign costs. We have not, however, thought it necessary to spell out all of these exclusions in the clause in detail. This is true of interest costs. In other words, I am happy to assure the House that it is not our intention that interest costs should be regarded as eligible costs in terms of the cost escalation scheme.
The next amendment I wish to deal with is (c). I have already made the point that the accounts for the cost escalation scheme will be separately treated and identified in our general accounts. These accounts will be published as part of the Appropriation Accounts. Similarly, separate liability figures will be maintained for cost escalation cover. These commitments will be counted against the proposed overall limit for our commitments. Having given the hon. Member that assurance I hope that he will be satisfied.
I come now to Amendment (d). I stressed in my opening statement that this scheme is designed as a temporary measure to meet abnormal difficulties. I stressed that we do not see the scheme as becoming a permanent feature of ECGD's facilities and services. I have frequently confirmed during the passage of this Bill that it is the Government's policies to bring about a credit peace and not to engage in a credit war. We have played, and continue to play, a full part in international negotiations to rationalise export credit.
On the other hand, we cannot ignore what other countries are doing, particularly when we have so far failed to persuade the French to stop their scheme.
I assure the House that it is certainly not the Government's intention that this scheme should be retained for longer


than is necessary. The clause as drafted makes this absolutely clear. The powers under which the scheme will be operated are to have a clearly specified two-year time limit. Each year thereafter there will be the opportunity for debate in, and decision by, the House before the powers are renewed. I believe that this gives the House the kind of control which I assume this amendment is seeking. I should have thought that public expenditure factors alone would mean that there would be no real wish on either side to retain the scheme or the powers for any longer than is necessary.
Amendment (a) to Amendment No. 11 concerns the starting date of 20th February. It may be necessary and desirable on an isolated number of occasions for the scheme to be applied to eligible cost increases which have occurred before 20th February in circumstances where the exporter submitted a tender against international competition before that date. If his tender is successful and he is awarded the contract after 20th February, the escalation provisions in the contract will normally run from the date of his tender price. It is normal commercial practice to restrict the validity of such tenders to a period of three months or so. In such circumstances our cost escalation cover would normally run from the date of the tender.

Mr. Tim Renton: Surely that cannot be right because if the exporter submitted his tender before 20th February he would not know that the cost escalation cover would be available. It cannot therefore be logical to give him the benefit of the cost escalation cover post facto.

Mr. Deakins: I do not think that there is any difference between us. The crucial point in regard to legislation is that the exporter would not have entered into a contract before 20th February. Had he done so before that date, he could not take advantage of the cost escalation scheme. Putting in a tender is not the same thing as entering into an export contract.

Mr. Nelson: Would it be possible to make clear that the provision applies only to cases where there had been a tender before that date? The provision

does not state that, but only that there is a contract credit after that date. I accept the logic of the Minister's argument, but it is open to the abuses which I mentioned earlier. It would not be beyond the bounds of possibility to introduce some sort of restraint.

Mr. Deakins: The legislation is drawn fairly widely, and the sort of amendment which the hon. Gentleman has in mind would make matters too specific in one particular detail when we are not making matters specific in other parts of the provision.
I continue with the explanation on Amendment No. 11(a). Where a tender was submitted before 20th February, we shall certainly encourage exporters to seek to renegotiate their base price with overseas buyers. But this will not necessarily succeed in every case.
The effect of the amendment would remove from ECGD the flexibility which it needs to facilitate important contracts where the exporter had tendered before 20th February but was unable to renegotiate his base price. We would expect any such cases to be exceptional, but they may arise. The clause as drafted enables ECGD to accommodate such situations if, on balance, it seems desirable in a particular case.
I turn to the other points which were raised and in particular the difference between capital goods—

Mr. Higgins: Mr. Higginsrose—

Mr. Deakins: I do not want to delay the House.

Mr. Higgins: I am trying to facilitate matters. Am I to understand that the Minister proposes to accept Amendments (a) and (d) to the new clause? He said that the amendments would be separately identified. I do not see why he cannot accept the "five years" argument. If it were to go for a further five years after the initial two, that would be an appropriate moment to review the whole matter. A mere one-and-a-half-hour debate would not be sufficient.

Mr. Deakins: I do not want to accept the amendments. I am hoping to persuade the House that the amendments are not necessary in view of the wide way in which the new clause is drafted. Let me now deal with the points raised—

Mr. Higgins: The Minister must not be impatient. He must understand that the House of Commons is concerned with legislation. Ministerial assurances do not have the force of law. This is why we believe it is necessary that an amendment should be made. I understand the Minister's point on Amendment (d) but would point out that Amendment (c) seems entirely in line with the assurance which he has given. I may have misunderstood the hon. Gentleman. If it is in line with his assurance, I hope that he will accept that amendment.

12 midnight

Mr. Deakins: I have given a number of assurances which are not in this clause. If they were all to be embodied in this clause, we would inevitably be here all night, and the Bill would never get through because people would be able to raise more and more points. The essence of the clause is that it is widely drafted. Guide lines will be published and, I hope, adhered to by ECGD and the exporters with whom it enters into contracts. Those guide lines may well be changed in the light of experience, but the basic legislation will enable us to change those guide lines from time to time.
With regard to publication in the accounts, I have given an undertaking that this will be separately identified in the accounts.

Mr. Higgins: Is it true that Amendment (c) is precisely in line with the undertaking which the hon. Gentleman has given? We wish to be absolutely clear about that. If that is so, I can see no conceivable reason why he should not accept the amendment.

Mr. Deakins: Amendment (c) is in line with the assurance which I have given. It proposes that after "Parliament" there should be inserted:
 and shall be separately treated and identified in the accounts of the Export Credits Guarantee Department ".
I see no reason why this amendment should in any way be pressed, since I have given an assurance that this will be done. There is no legal point involved here.
May I continue with the distinction between capital goods contracts and production line contracts. We have started with capital goods contracts because we

believe this is the area of greatest need. The figure of forecasting future cost movements increases with the length of manufacture, and this is usually related to the size of the contract. We believe that exporters selling goods with a short manufacturing period or off a production line should be forecast more easily and should make satisfactory provision for price movements.
The hon. Member for Tonbridge and Mailing (Mr. Stanley) referred to international credit competition and mentioned the Exim Bank. The Exim Bank case related to interest rates and to a different element in export support. It is not comparable to cost escalation. But I can assure the hon. Gentleman that we are very keen to enter into an international agreement to rationalise export terms. Nevertheless the outlook for these international negotiations is regrettably far from promising.
This has nothing to do with British attitudes or British actions. It is entirely because of the major differences between several other countries on important matters of subsidies concerning the appropriate maximum lengths of credit, the right minimum levels of interest rates, the appropriate limits to place on down payments, local cost financing and so on. If the negotiations break down it will not be because the differences could have been resolved but for our cost escalation scheme. It will be because the other differences which have dominated the situation all through have proved to be irreconcilable. We shall not be in the position of being pilloried by the rest of the world for having introduced our scheme and having nullified international efforts. We are doing our best and we are reacting in the interests of our exporters in introducing this limited scheme of cost escalation.

Mr. Cope: I apologise for asking the hon. Gentleman to give way again, but I am jobbing back slightly. I could not believe that he was talking about the difference between capital and other export orders. I accept that this scheme should apply only to orders over a certain size—say £2 million—and over a certain period—say two years. But I cannot see the difference between an order for a factory in my constituency for £50 million over a number of years, which,


because it has a production line element in it, should be rejected by the criteria which are to be used—admittedly not in the Bill but nevertheless they are to be used—when another order perhaps for only £2.1 million should be accepted under this scheme. The hon. Gentleman has adduced no argument for one being accepted and the other being rejected.

Mr. Deakins: One argument against it is the public expenditure implications. The wider one allows exporters to take advantage of the scheme, on a production line basis, the bigger the public expenditure implications. We have to draw the line somewhere. At the same time, I assure the hon. Gentleman that our minds are not closed. We shall look at this matter in the light of experience and the representations we receive.
The major representations which we have received in the past year or so have come from major capital goods exporters with long manufacturing periods who have to bear the burden of unknown rising costs and who therefore need some sort of cost escalation protection or cover.
The basic point is that we have to consider the unit value of the export. If that unit value is set at £2 million, it may well rule out some production line facilities, but it may bring in some others. Perhaps "production line" is something of a shorthand term and not very good for distinguishing things which are worth less than £2 million from those worth more. But it is not the only definition, and, as I say, it may not be a very good one. We are willing to look at the matter in the light of experience, but I ask hon. Members to recognise that the more we widen the scheme the greater will be the public expenditure implications.
The hon. Member for Chertsey and Walton (Mr. Pattie) asked about aircraft. Exports of aircraft are eligible under the scheme, subject to exactly the same criteria as apply to any other contracts.
The hon. Member for Gosport (Mr. Viggers) commented on the wording of the 1968 Act and other matters. Payments by the ECGD under the scheme will not be made unless and until the contracts have been entered into. The negotiations with the ECGD will normally precede the signing of the contract. Indeed, exporters will want to know where they stand before signing contracts.
I think that I have dealt with virtually all the points raised by hon. Members. I am sorry to have gone on at some length, but it is an important new scheme, and it is right that the House should be concerned to probe the matter even at this late stage on Report.

Mr. Deputy Speaker (Sir Myer Galperu): The Question is—

Mr. Higgins: I hope that we may have a reply from the Under-Secretary —we have had none so far—regarding the terms negotiated with Russia. I spent some time on that matter. The Secretary of State for Trade made clear that this transaction—and the one with Iran, too—was related to the new clause, but the Under-Secretary has not covered that question at all. I shall be grateful if he will expand on what we have so far heard from the Prime Minister and others. That would be helpful.

Mr. Deakins: We dealt with the Russian business at some length in Committee, and I do not think that it is directly relevant to the clause now before us, which is for cost escalation cover for exports to virtually any part of the world where the ECGD will provide facilities. Obviously the total costs of the scheme will have to be taken into account, together with the costs of providing export credit generally to all parts of the world, not just to Russia.
We have not revealed the details of the Russian credit agreement because it is not Government practice to do so. We have no intention of doing so in this case, or, for that matter, in the case of Iran. We are, however, working towards international agreement on these things. I should add that in considering trade with the Communist bloc, and with the Soviet Union in particular, we have to take account of what our competitors are doing. Otherwise, we shall find that our exporters are out in the cold. Plainly, exporters to the Soviet Union will be able to take advantage of the cost escalation scheme because many of the contract projects with the Soviet Union are very large projects involving long manufacturing and delivery periods.
Finally, I return to the point which—

Mr. Deputy Speaker: Order. The hon. Gentleman had sat down a few minutes


ago. I hope that it is "Finally" this time.

Mr. Deakins: I am sorry, Mr. Deputy Speaker, but I am trying to do my duty to the House.

Mr. Deputy Speaker: I quite understand that, and I appreciate that it is an important subject, but we have another three important subjects to be dealt with later, and we must have some regard for those hon. Members who are in attendance. [HON. MEMBERS : "No.") Certainly. What the hon. Members says is all very well, but we cannot have this cat-and-mouse business, with the Minister sitting down and then another hon. Member getting up. We shall have to put a limit on it.

Mr. Higgins: On a point of order, Mr. Deputy Speaker. May I say with great respect that I had raised all these points in my original speech and the Minister, no doubt due to an oversight, did not reply to them. It was not therefore unreasonable to ask the Minister before he sat down to deal with them. He is now covering those points. This is not a question of coming back on the matter. We are simply trying to get an answer to the points originally made.

Mr. Deputy Speaker: In my opinion the Minister sat down. With the leave of the House he is entitled to speak twice, but there must be a limit at some stage.

Mr. J. Enoch Powell: Further to the point of order, Mr. Deputy Speaker. May I submit to you that the propriety or otherwise of what is done or said cannot be affected by the amount of business still remaining to be transacted. Either a procedure is in order or it is not, but the fact that other Members are waiting for later items on the agenda cannot affect the matter.

Mr. Deputy Speaker: This is an open-ended debate. There is no time limit. The Minister said that he was dealing with his final point and in my opinion he had sat down. I was entitled to put the Question.

Mr. Deakins: I can assure you, Mr. Deputy Speaker that this will by my final point. The Opposition were pressing me strongly on one amendment. I must tell

them that the ECGD's existing accounts are not specifically required by its statutes to cover this question and it would be a new departure to attempt to govern these accounts by regulation. Nevertheless I am willing to have this looked at in another place if that will meet the concern expressed by the Opposition.

Mr. Higgins: May I say, Mr. Deputy Speaker, that in view of what the Minister has said we do not wish to press our amendments to the new clause.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause 2

NOTIFICATION TO PARLIAMENT IN CERTAIN CASES

'Before entering into commitments or liabilities under the Export Guarantees Acts (including this Act) in respect of a person who is in receipt of a loan, grant, guarantee or other form of financial assistance under sections 7 or 8 of the Industry Act 1972 or section 3 of the Industry Act 1975, the Secretary of State shall notify Parliament accordingly '.— [Mr. Tim Renton.]

Brought up, and read the First time.

Mr. Tim Renton: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker: With it it will be convenient to discuss Amendment No. 9, in Clause 4, page 3, line 12, at end insert :
'(c) a return showing the aggregate amount of liabilities entered in respect of persons in receipt of loans, grants, guarantees or other form of financial assistance under, respectively, sections 7 and 8 of the Industry Act 1972 and section 3 of the Industry Act 1975 '.

Mr. Renton: Despite the late hour I hope that hon. Members will forgive me if in moving the clause I go back a little in time and examine ECGD practice.
It has been the custom for ECGD Section 1 business to be confined to commercial risks and the advisory council has vetted the business that ECGD was prepared to write under that section.
Section 2 business has always been quite different. This is business in the national interest which is not suitable for submission to the advisory council but which in ECGD judgment could be


underwritten. In other words, it is a case where ECGD believes that there is a reasonable risk involved, and this category would cover, for example, arms shipments.
If ECGD feels that something is unduly hazardous—and this goes back to the much-quoted words of the Prime Minister when he was President of the Board of Trade—discussion then ensues, and this is clearly a fringe area in which the judgment and even the independence of officials in the ECGD are bound to be matched against the will of Ministers.
If the Minister is ultimately unable to persuade the ECGD officials that the business can be underwritten he may instruct them that they should take on that business. For many years there has been a convention that if this happens the Minister reports such business to the House. This practice has been regularly followed in the past. It happened in the case of the Suez—Mediterranean pipeline project under my right hon. Friend the Member for Knutsford (Mr. Davies).

12.15 a.m.

It was followed earlier by the right hon. Member for Battersea, North (Mr. Jay), when he was President of the Board of Trade, in the case of cover for exports to Saudi Arabia. In both instances they came to the House and made it abundantly plain that they had instructed ECGD to provide the cover. The most recent example was that of the Secretary of State for Trade, who in a Written Answer on 5th March announced:
I have instructed ECGD to provide facilities to support the export of motor cycles manufactured at Meriden.—[Official Report, 5th March 1975: Vol. 887, c. 445.]
In that way, because the political will of Ministers has always been made abundantly clear by announcing to the House that instruction has been given, what I would call the business integrity of ECGD has been preserved.

Many Ministers have confirmed to the House that that would continue to be the case and that ECGD would not suffer from political pressure. They have said that if it were given instruction that would be reported to the House. The latest person to follow that well-trod path was none other than the Under-Secretary of State himself. On Second Reading, in replying to a comment from my hon.

Friend the Member for Gosport (Mr. Viggers), he said:
The hon. Member for Gosport also suggested that the Government were using ECGD facilities for their own purposes. I give him a categorical assurance that that is not so.—[Official Report, 10th February 1975; Vol. 886, c. 159.]

In Committee the question of export facilities and bank guarantee facilities for Meriden and NVT was raised by my hon. Friends with an interest in the subject. The Under-Secretary of State replied :
Any bank guarantee facilities for Meriden or NVT would, I repeat, be considered according to ECGD's existing power and procedures.…—[Official Report, Standing Committee D, 20th February 1975, c. 64.]
Thus we might have thought that we had a clear understanding of ECGD and the absence of the influence of Ministers.

I have cited the case of Meriden. The Secretary of State told the House on 5th March that he had given an instruction, but what about NVT? I am reminded in the case of NVT of a comment made by Sherlock Holmes to Dr. Watson. He asked Watson about the curious incident of the dog in the night-time. Watson replied "The dog did nothing in the night-time ". Sherlock Holmes replied "That was the curious incident ". It is equally curious that we have had no reference to NVT and an application through ECGD for export credit. If NVT needed an export guarantee, why did it not go to the Export Credit Department to get it? If it went to ECGD to get it and it was refused for some reason, why did not the Secretary of State give an instruction to ECGD to issue such cover? He cannot possibly have been worried that NVT did not fall into the category of national interest, because, on the very same day as ECGD cover to Meriden was announced, the Secretary of State for industry came to the House and announced that he was guaranteeing an £8 million export facility to NVT under Section 8 of the Industry Act. As he said to the House on that same evening :
This is the first time that the Industry Act… has been used to provide a guarantee for exports.
He then said:
I might add that though there is a connection … between the NVT and Meriden position, this is a motion to permit export finance to be made available for NVT itself.…

Earlier he had said:
 This is the first time that the Industry Act … has been used to provide a guarantee for exports.…."—[Official Report, 5th March 1975 ; Vol. 887, c. 1672.]

Hon Members may ask why the Industry Act procedure was used uniquely and for the first time rather than the well-established ECGD procedure which I have described. We can only conclude that that must have been because the use of the Industry Act procedure enabled the Secretary of State for Industry to bring pressure to bear on NVT to go along with the solution that he wanted to achieve, a solution based on three factories producing motor cycles rather than two factories both of which belong to NVT and are divorced from Meriden. If a facility had been available to NVT under ECGD procedures—and the way was open for this to be done—NVT would not have had to give in to the political pressures from the Secretary of State for Industry.

This is a curious case, and complicated, but that appears to be the only reasonable interpretation that we can put on the fact that the Secretary of State for Industry came to the House and used Industry Act procedures to get an £8 million facility instead of the Secretary of State for Trade's using an established procedure under ECGD. If that is so it amounts to a gross perversion of the way in which export credits have been handled for many years.

There is no point in having an Export Credits Guarantee Department if, when its established procedure is embarrassing to the Government and does not achieve their ends, they use the provisions of the Industry Act to circumvent the commercial decisions of ECGD and to get round procedures that have been used for many years. That is, quite simply, cooking the books to achieve the Government's political aims. It may enable the Under-Secretary of State to say that ECGD is not subject to political pressure, but it means that Peter is being robbed to pay Paul, apparently to maintain the integrity of the ECGD. I imagine that officials of the Department must find that an intolerable position.

My hon. Friends and I appreciate that the wording of the new clause approaches

the matter from the wrong end. Unfortunately, we cannot in a debate on this Bill control the actions of the Secretary of State for Industry. The clause provides that if a person who is in receipt of assistance from public funds under the Industry Act seeks a facility from ECGD as well the Secretary of State will have to notify Parliament.

That will have the effect of preventing the balance sheets of companies being bolstered or corrected by an injection of funds from the Industry Act or the National Enterprise Board and those same companies which have already had one injection of public funds obtaining —without Parliament knowing about it-normal cover from ECGD under Section 1 or Section 2 procedures because their balance sheets, thanks to the injection of Industry Act assistance, will be of sufficient standing to permit OCGD to underwrite the business offered.

It is with that purpose in mind and to correct the serious abuses that we believe may have taken place under Section 2 procedures of ECGD over the past weeks that we have tabled the clause. I trust that the Government will consider it seriously. It will go some way towards rectifying the abuse which I have mentioned.

Mr. Deakins: I cannot understand how or why hon. Members can suggest that this clause with the associated amendment be included in this Bill. The assistance which firms may receive under the Industry Act can take many different forms and be for many different purposes. The assistance may have little or no direct connection with the firms exporting activities. In any case, assistance under the Industry Act has no connection with the Bill before the House and the matters we are discussing. What is the real purpose of this new clause? In practice, it would of course unnecessarily restrict ECGD's ability to provide its facilities to firms within its normal operations while serving no useful purpose whatsoever.
I have on various occasions given the House assurances about the use of ECGD facilities and the risks ECGD will take.
I stand by them and by every word I said in Committee and on Second Reading I imagine that hon. Members are


not proposing that the fact that a firm may have received assistance under the Industry Act should in some sense make it ineligible for ECGD facilities or that such firm should in some sense be placed in a special ECGD category. I can assure the House that any assistance firms may have received remains a fact which ECGD will take into account when making its underwriting judgments. The House is well aware of established practice about Ministerial statements when ECGD is instructed to give cover.
There has been no abuse of Section 2 procedure.
On the amendment I would say that the return proposed would serve no useful purpose and that this kind of overall figure would be absolutely meaningless. The hon. Member for Mid-Sussex (Mr. Tim Renton) raised the question of Meriden and NVT. Government facilities for them were subject to prolonged debate in the early hours of 6th March and ECGD facilities for Meriden are in no way concerned with this Bill, as I said in Committee.
The grant of ECGD facilities for Meriden do not in any way conflict with the undertakings I and other Ministers have given about the use of ECGD facilities.
When the Secretary of State made the statement to the House about the instructions he had given to ECGD to give facilities under Section 2, that conformed with traditional practice.

Mr. Higgins: The Government should start to distinguish between a statement and a written answer.
The Secretary for Industry in the debate said that the Secretary of State for Trade had made a statement, but that statement was made on the day the debate took place by way of a written answer which was not generally available to the House. I urge the Under-Secretary not to use "statement" when this was done, surreptitiously if I may say so, by written answer.

12.30 a.m.

Mr. Deakins: There was nothing surreptitious about it. We could not do it until final negotiations were completed between Meriden and NVT, and we announced it on the day so that the House

could have access to the information in the debate later.
The fact that it was described as a "statement" was in conformity with past practice. On two occasions in the past, in 1965 and 1971, similar statements about an unusual use of Section 2 facilities were made by way of Written Answer —under the last Labour Government and under the last Conservative Government. There are adequate precedents on both sides for what we did in this case.
I hope that the Opposition will withdraw this ill-considered clause and amendment.

Mr. Stanley: Before considering the hon. Gentleman's final suggestion, we must ask him to deal directly with the matter raised by my hon. Friend the Member for Mid-Sussex (Mr. Renton). My hon. Friend did not refer to the alleged abuse of ECGD facilities in the Meriden context. That is not at issue. What is behind the amendment is the use of export credit facilities for NVT, which is a quite different matter.
Will the hon. Gentleman now tell us frankly—the Secretary of State did not the other night—whether NVT in the last few months has been applying for export credit facilities through the ECGD. If so, what has been the response of the ECGD to those applications?

Mr. Deakins: ECGD facilities for NVT, as distinct from Meriden, are part of the ECGD's normal commercial activities under Section 1 of the 1968 Act. Details of such arrangements are traditionally confidential between the Department and its policy holders. The terms and conditions of the relationship between the ECGD and this policy holder are confidential and commercial, and it would not be proper to divulge what they are in detail.
As for the £8 million, which was not an ECGD operation, that was debated and agreed by the House on 6th March.

Mr. Stanley: The NVT order for export credit was granted under the Industry Act. But the hon. Gentleman has not answered our question. Over the last few months, has NVT been applying for export credits, as we suspect and as many outside this House know that it has been? NVT has been refused export credits by the ECGD over the last few months, and


no Minister has yet explained why the ECGD was unable to grant export credits to NVT, which had finished items of production ready for export, yet it was able to grant them to the Meriden co-operative, which had not started production. That is a totally inexplicable anomaly, and the only explanation can be that the Secretary of State for Industry brought political pressure to bear on the ECGD.
That is the reason why we have tabled this amendment. I hope that the hon. Gentleman will now comment directly on the fact that NVT has been refused export credit facilities in the last few months, and acknowledge that it is due to the application of political pressure.

Question put and negatived.

Clause 3

LIMIT ON COMMITMENTS

Amendments made :

No. 3, in page 2, line 31, leave out and '.

No. 4, in line 36, at end insert :
' and
(d) the liabilities at any time of the Secretary of State in respect of arrangements made under section (Payments to exporters in respect of cost increases) above,'.—[Mr. Deakins.]

Mr. Higgins: I beg to move Amendment No. 5, in page 2, line 37, leave out £12,200 million ' and insert—
' (i) in pursuance of commercial transactions covered by section 1 of the Export Guarantees Act 1968 or section 1 of this Act, £7,200 million ;
(ii) in pursuance of transactions adjudged to be in the national interest and covered by section 2 of the Export Guarantees Act 1968 or section 1 of this Act, £4,700 million ;
(iii) in pursuance of liabilities arising under paragraph (d) above, £300 million '.

Mr. Deputy Speaker: With this, we may consider Amendment No. 6, in line 42, leave out £3,000' and insert
'in respect of sub-paragraph (i) above not exceeding £1,000 million, in respect of sub-paragraph (ii) above not exceeding £500 million, and in respect of sub-paragraph (iii) not exceeding £100 million'.

Mr. Higgins: This is a matter which, in essence, we considered in Committee on 18th February. But it raises a very important topic, and we thought it right to return to it on Report. I hope that the Under-Secretary has had time in the intervening period to consult his officials,

and I hope also that he will feel able to accept the amendments.
The Government have two proposals. The first is to amalgamate the two separate limits which existed previously for what, under the old legislation, would be considered Part I and Part II business. In Committee, we explained at length why we thought that distinction and the use of the two separate limits was desirable. We appreciate that the limit on Part I business may be almost reached. But that is a matter which we can cover simply by extending the limit. The Part II limit is not in danger of being reached in the immediate future. Even if it was, there are provisions for increasing it by order as well. That being so, it is surely in our interests that the House should have control over both types of business, which are very different. One is in the normal commercial operation and the other is in the operation of effective political judgment in the national interest. Therefore, it seems that there is an argument for perpetuating the distinction which traditionally has always been made in these matters.
Regarding the increase of limits by order, we felt that the figure of £3,000 million each time on a one and a half hours debate seemed excessive. We hope that by now the Under-Secretary has come to the conclusion that the figures suggested in the amendment would be more reasonable. We think that it would make for more rapid progress if he would simply say that he accepts both amendments. That would be in the interests of the House and of the way that we control our affairs.

Mr. Deakins: We have already debated the proposals in Clause 3 at considerable length in Committee. The only new point in this amendment is the proposed limit on cost escalation liabilities.
I will repeat the reassurances that I gave in Committee, that, in proposing that the limits be combined, which is a worry to some hon. Gentlemen opposite, it is not our intention that Parliamentary control should be lessened or that there should be any change in the way that ECGD operates.
I stress that separate estimates for Section 1 and Section 2 and for the cost


escalation scheme will be submitted, that separate commitment figures will be maintained and published, and that separate accounts will still be rendered to Parliament.
I assure the hon. Member for Worthing (Mr. Higgins) that I have looked at this matter again arithmetically. Unfortunately, the arithmetic cannot be put down in a way which will satisfy the needs of the Government and of ECGD. The question is not whether the House should debate the limits, but how often and in what form. Our proposal would allow the House to debate them at least three times in the next five years. We regard five years as the time that it would take to get from £12,200 million in commitment limits to £21,200 million. On each order the House could debate ECGD operations under Sections 1 and 2 and the cost escalation scheme.
A number of hon. Gentlemen are worried about switching between Section 1 and Section 2 business. That matter could be dealt with in a debate, whereas on a separate order on Section 1 or Section 2 it would not be appropriate in the House of Commons under the rules of order to discuss other parts of ECGD's business.
There is no dispute between the two sides about the necessity to increase the limits. The concern is over how much they should be allowed to increase without new legislation and the size of each tranche. We need high limits because of inflation. We need an amalgamation of the commitment limits to allow flexibility for the future. Economic circumstances are changing. We have seen a big upsurge in the past year or so in Section 1 business. It is possible that in two or three years there could be a switch or an upsurge to Section 2 business. We want to be able to cope without coming back more than once a year to the House of Commons for an order merely to increase the Section 1 limit or the Section 2 limit.
On the basis of those assurances, which repeat those which I gave at length in Committee, I hope that the hon. Gentleman will withdraw the amendments.

Mr. Higgins: I did not find that rapidly delivered speech any more convincing than I did the first time round.

However, the Under-Secretary has considered the previous point that we mentioned, with which he seemed to be agreeing, and gave an assurance that it would be considered in another place. It may be that in the other place those reading the report of this debate will also find the hon. Gentleman's argument unconvincing and will return to the subject. In the circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Stanley: I beg to move Amendment No. 7, in page 3, line 2, at end insert :
' (4) The denomination in pounds sterling of the limits specified in this section shall not prevent the Export Credits Guarantee Department from assuming liabilities in currencies other than sterling ; but where such non-sterling liabilities are assumed, a sterling liability equal to the sterling equivalent of the non-sterling liability, calculated at the rate of exchange prevailing on the date the liability is assumed, will be deemed to have been incurred for the purpose of calculating the aggregate of the liabilities, sums and amount of principal moneys referred to in subsection (1) above '.
We began our debates this evening discussing a Government new clause that will undoubtedly boost exports substantially, but at considerable public cost. I am glad to conclude our proceedings on the Bill this evening by proposing an amendment that will also boost exports substantially, but effectively at nil public cost.
As the House will be aware, for many years we have had a currency, sterling, which has been relatively weak and, on all the prognostications, both domestic and international, it is likely to remain relatively weak. Over the years we have had to pay a considerable penalty for a depreciating currency, the penalty being the increased cost to ourselves of the goods we import.
That penalty can be offset only in the export market, but if we could denominate our exports in currencies that were strong, preferably currencies that were stronger than our own, we should get back to this country a substantially greater value for our exports than if we denominate those exports in sterling itself.
Let me give a small illustration. If an exporter entered into an export contract in the second quarter of 1971 and that export contract had been made in deutschemarks rather than sterling, in


balance of payments terms it would have produced a benefit to us 49 per cent. greater than if it had been done in sterling, because that is the measure by which deutschemarks have appreciated over sterling during that period. It is a historical if regrettable fact that by and large most of our major export contracts over the last 15 years have been denominated in sterling and we have lost thereby hundreds of millions of pounds in the value of our exports.
The purpose of the amendment is to make it easier for British exporters to denominate their export contracts in currencies other than sterling. The amendment would not require any immediate change of policy by the ECGD. It does not say that the ECGD will be obliged to underwrite contracts in currencies other than sterling, but simply that it is not precluded from doing so.
As the Under-Secretary told me in a Written Answer on 23rd January, the ECGD at the moment can cover contracts expressed in foreign currencies. But the stumbling block has been the simple one that in previous export credit legislation ECGD liability limits have been expressed in sterling, and so it has been necessary for the ECGD to confine its liabilities to sterling. There is no barrier at the moment to exporters getting their contracts in foreign currencies, but the ECGD can provide cover only in sterling.
This creates no difficulties where supplier credit is concerned, as I shall illustrate. The difficulties are solely with buyer credit. With supplier credit it is perfectly possible for the exporter to denominate his export contracts in foreign currency and still obtain cover from the ECGD in sterling. It is possible to have a non-matching currency situation with supplier credit because the supplier will have a contractual repayment schedule expressed in the foreign currency and be able to discount the repayments due to him. The supplier will be able to take a promisory note to the bank, discount it and take cash and cover himself against exchange risk.
However, with large export orders supplier credit is not an option and the exporter has to use buyer credit, as the

House will know. He has to use buyer credit essentially for two reasons. The first is that buyer credit, unlike supplier credit, provides 100 per cent. cover. Supplier credit provides only 90 per cent. cover and the balance of 10 per cent. has to be carried by the supplier as a contingency liability on his balance sheet. Where large sums are concerned this represents a considerable burden on the balance sheet, and therefore most large export contracts use buyer credit arrangements rather than supplier credit.
In addition, the exporter with a large contract will want to use buyer credit because he will want to take advantage of progress payments. It is possible to get progress payments with buyer credit but not with supplier credit.

12.45 a.m.

For those two reasons, all our major exporters, where large export contracts are concerned, use buyer credit arrangements. Why is it not possible to have non-matching currency arrangement where buyer credit is involved? It is because there is no market, in the long term, in forward currencies. The buyer credit repayment schedule will have an average life of seven years, and that will start only when delivery has been taken. The average buyer credit will be outstanding for about 10 years from the date of the signing of the credit arrangement.

What sort of forward cover is it possible for a bank to obtain? It may obtain only up to five years cover forward in dollars and only up to two years cover forward in deutschemarks. For that basic reason it is not possible for banks to contemplate a long non-matching situation in buyer credit. There is therefore a clear need to provide in the legislation a means whereby it will be possible for the first time for the ECGD to provide cover in currencies other than sterling.

The only conceivable public cost that could arise would be as a result of a default by an exporter, when the liability that the ECGD had assumed would be called upon. If that liability is expressed in a currency which has appreciated against sterling the ECGD liability will be somewhat greater than if that cover had been provided in sterling. But, as the Parliamentary Secretary will know, the rate of defaults on buyer credits is minimal. I believe it is under 1 per cent.


So we are talking about a very remote contingency.

Against that, there are substantial potential balance of payments gains to be obtained by giving the ECGD this extra flexibility. The first gain is that the exporters themselves, if they are able to denominate their contracts in a strong currency—for example, deutschemarks with progress payments for the export contract one or two years ahead, they will be able to sell the deutschemarks forward and obtain a substantial premium on today's market. Today, an exporter, if offered deutschemarks one year ahead, would be able to get a premium of 6;ths per cent. compared to sterling. If people have deutschemarks to offer two years ahead they will be able to get a premium of 12 per cent. compared to sterling.

Therefore, the exporter, knowing that the sterling value of a large contract denominated in deutschemarks will be higher, will be able to reduce the contract price and make his own export price that much more competitive.

The second major balance of payments benefit—and this is the large one—is that y providing a repayment schedule in a currency which will appreciate over sterling the balance of payments worth will he the measure by which that currency appreciates in relation to sterling. It is evident historically that if we had had a large section of our exports denominated in deutschemarks for the last 10 years it would, each year, have put hundreds of million of pounds on the value of our exports. If that trend was thought likely to continue we could do the same over the next 10 years.

The amendment does not impose any change of policy on the Government or on the ECGD. However unless it is made, ECGD will continue to be locked into offering cover only in sterling, which has the objections to which I have referred. Therefore, I hope that the Under-Secretary will accept the amendment.

Mr. Higgins: The House will be grateful to my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) for his research, for the points he has made and for the lucid way in which he has put the ease for the amendment.
I hope that the Under-Secretary will take the point that what is at issue is not whether a particular contract may be denominated in sterling or another currency but whether ECGD is in a position to offer cover when the contract may be denominated in another currency.
I understand that it is not possible for firms commercially to cover forward over the length of time for which such contracts are likely to run, certainly if it takes two years to build the equipment and then perhaps another five before the contract runs out. No doubt the Minister will have carried out research of his own on that matter.
My hon. Friend seems to be on a good point, and I hope that the Under-Secretary will give a reasoned reply.

Mr. Deakins: A certain amount of misunderstanding may lie behind the amendment, and therefore it may be useful if I explain the present position in some detail.
ECGD's limits are expressed in sterling. However, that fact does not mean that ECGD cannot provide cover for contracts which are expressed in or involve payment in foreign exchange. The Department can and does insure such business. What it does not do is to provide cover against exchange risks or exchange rate fluctuations. Neither have approaches from exporters led us to believe that there is any proven need for such cover. As. I have told the House in answer to Questions, where exporters wish this kind of protection there is usually a forward exchange market to meet their needs.
A point was made about buyer credit. Exporters do not have to use buyer credit for big contracts. Some big contracts are done on a supplier credit basis, for example, because buyers prefer this technique. Problems of foreign exchange cover are not different between buyer credit and supplier credit operations. ECGD can cover buyer credit operations expressed in foreign currency, but, as in supplier credit operations, this does not involve foreign exchange cover.
Buyers and sellers will have a different point of view on which is the best currency to use for a sale. Buyers will seek to be invoiced and to pay in a currency which they expect to depreciate, and sellers will prefer to use a currency which they expect to appreciate. As i am sure


I do not need to stress to Conservative Members the use of sterling as a world trading currency has implications which extend considerably beyond the scope of the Bill.
The amendment could produce an odd situation which I doubt that Conservative Members wish to see arise. If ECGD were to assume obligations expressed in a foreign currency and were to write into its statutory limits the sterling equivalent of such obligations calculated at the date the liability is assumed, then, in the event of the foreign currency appreciating, ECGD could have incurred obligations which were not included in its limits. In the event of significant amounts of foreign exchange obligations being incurred and of large appreciations in the currencies, the liabilities outside the limits could become large.
Having said this, I take some of the points which both hon. Members have raised. I have already mentioned the work ECGD is already doing on closing a gap in its cover where exporters invoice in foreign currency and where they have associated foreign exchange obligations. If the House wished, I could go into more detail. As I have said, there is no proven need for cover beyond this but if, perhaps because of changing circumstances, a case were made out for such cover at a future date, then the Department would always be willing to consider it. If hon. Members have points or proposals they wish to make in this context, then I should be very happy to receive these in writing.
Against the background I have discussed above at some length, I hope that the hon. Member will now be willing to withdraw this amendment.

Mr. Higgins: The Under-Secretary says that the ECGD would be willing to consider it. Are we to understand from that that it can now do so within the scope of the Bill and existing legislation?

Mr. Deakins: It would not require additional legislation, as I am informed at the present stage. We are talking about not assuming foreign exchange risks. We certainly do not want to do that. But if the hon. Gentleman would like to write making proposals, we should certainly look at them, because the amendment that he is suggesting to the Bill would not

meet the objective that he appears to want to produce and, furthermore, would cause ECGD perhaps to take on risks which would be completely unjustifiable.

Mr. Stanley: First, if the Under-Secretary has the impression that the amendment is in any way designed to provide insurance against exchange risk, he has completely misunderstood the amendment. 1 hat is not its purpose at all. I am sorry if anything I have said may have given that impression. It is wholly false. The amendment is simply to allow ECGD to assume liabilities in currencies other than sterling.
The only objection that the hon. Gentleman has made to my argument—I do not know whether he has accepted the force of the argument in terms of the balance of payments benefit—is the possibility that if the ECGD assumed liabilities in a currency other than sterling and that currency appreciated against sterling, by the time the liability fell due the ECGD could have found itself going above its statutory limits. That is a very technical and very minute objection, because we are talking here only about the most remote contingent liability in the buyer credit context. As the hon. Gentleman knows, the rate of default on buyer credits is, I believe, well under 1 per cent. Therefore, the objection to the possibility of ECGD's limit being seriously exceeded because of this remote contingent liability as a result of a slight appreciation of a currency against sterling falls to the ground.
I welcome what the hon. Gentleman said about the offer to write to him which I certainly propose to do. I believe that by correspondence and possibly meetings we may be able to take this matter further.
I should like the hon. Gentleman to clarify one point which does not square up with the Answer that he gave to me on 23rd January, because it is directly relevant to the legislation. He said then :
 ECGD does cover contracts expressed in foreign currencies "—
that we know—
 although as the Department's statutory limits are in sterling its maximum potential liability in such cases has to be denominated in sterling." —[Official Report, 23rd January 1975 Vol. 884, c. 48]
As my hon. Friend the Member for Worthing (Mr. Higgins) has said if that


Answer is correct it would require legislation to enable ECGD to assume liabilities in other currencies, in which case, if there were merit in this amendment, we should have to seek to amend this legislation in the other place.
As a matter of legality, will the hon. Gentleman clarify whether it is possible under the Bill as now drafted for ECGD to assume liabilities in currencies other than sterling? If his answer is "Yes ", there is no immediate need for legislation. If his answer is "No, we should need to consider the Bill further in another place.

1.0 a.m.

Mr. Deakins: I have already said that ECGD can accept a situation in which exporters get a foreign buyer to denominate the foreign currency for the purposes of the contract. That will be perfectly acceptable to ECGD. I am not sure whether what the hon. Gentleman is proposing in his major admendment is foreign exchange cover. If it is not there would be no rise in ECGD liabilities and the point I was making would not apply. This is a highly technical and complex subject. I am prepared to meet the hon. Gentleman to discuss it. I do not believe that it is a point that can be pursued on this amendment.

Amendment negatived.

Clause 5

SHORT TITLE, CITATION AND SUPPLEMENTARY PROVISIONS

Amendments made : No. 11, in page 3, line 22, at end insert :
' (4) Arrangements may be made under section (Payments to exporters in respect of cost increases) above in relation to contracts entered into on or after 20th February 1975 and increases that have occurred before the passing of this Act.'—[Mr. Deakins.]

No. 12, in page 3, line 24, leave out from 1968 ' to 3(6) ' in line 25 and insert :
 trade with other countries "and" securities" have the meanings given in sections 1(3) and'.—[Mr. Deakins.]

No. 13, in page 3, line 33, leave out ' section ' and insert :
' sections (Payments to exporters in respect of cost increases) (5) and '.—[Mr. Deakins.]

Motion made and Question, That the Bill be now read the Third time, put

forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

Orders of the Day — AGRICULTURE (CALF SUBSIDIES)

1.3 a.m.

The Minister of State for Agriculture, Fisheries and Food (Mr. Edward S. Bishop): I beg to move,
That the Calf Subsidies (United Kingdom) (Variation) Scheme 1975 a draft of which was laid before this House on 19th February be approved.
This variation scheme removes the £10 increase in the calf subsidy introduced as a temporary measure last July. The increase was approved by the European Economic Community last March when it was decided that the United Kingdom need not adopt the intervention scheme of support for the beef market, and also that the United Kingdom guide price for beef should be increased to a lesser extent than in the other EEC countries. The increase in the calf subsidy was intended to offset the effect of these decisions. Now that new support arrangements for beef have been agreed—my right hon. Friend made a statement to the House to this effect on 17th February—the reasons for the increase no longer exist.
Under the new variable premium system, producers should be assured of average returns of between £22 and £23 per live cwt. for finished animals. There have already been substantial improvements in the prices for calves and store animals since last November when measures were first taken to put a floor in the market. We may expect these increases to continue. In addition, average prices of fat cattle have risen recently by as much as £2 per cwt. We are therefore satisfied that confidence is returning to the market and that the special arrangements justifying the increase in the calf subsidy no longer apply. Accordingly, this variation scheme provides for a return to the former levels of subsidy.
The lower rates will, however, not apply immediately. Only calves born on or after the day on which this variation scheme comes into operation will be affected. All calves born up to the day


when the scheme comes into operation will, provided they meet the conditions of eligibility, continue to qualify for the higher rate. For carcases, stage B, the reduction in rates will not begin until 1st April 1976. This will mean that the higher rates will have been payable at both stages A and B for roughly the same period.
Finally, this opportunity is being taken to propose three minor amendments to provisions which are no longer relevant. The first two concern carcases at stage B. The requirement that a carcase must be sold to be eligible is to be deleted. This was a legacy from the old Fatstock Guarantee Scheme and there is no equivalent provision for calves, at stage A. Moreover, it is a requirement that has proved quite impracticable to enforce. Its removal will, therefore, be generally welcomed and should not lead to any abuse of public funds. Secondly, an amendment is proposed to prevent the owner of a brucellosis or tuberculosis reactor or contact from obtaining calf subsidy in addition to compensation when he opts to have such an animal slaughtered by the Ministry under animal health legislation. The subsidy potential of the animal is taken into account when compensation based on market value is assessed and subsidy payment in addition would therefore be inappropriate.
The third and final amendment will mean that horned pedigree bulls and certain horned pedigree female animals already exempted from the Northern Ireland dehorning legislation will in future be eligible for calf subsidy in Northern Ireland if presented live for certification. At present they are ineligible under a provision of the scheme applying only to Northern Ireland designed to reinforce the already compulsory dehorning of cattle offered for sale. The Northern Ireland Breed Societies have represented that as these pedigree animals are exempt from the general dehorning requirement, they should not be prevented from getting calf subsidy. Accordingly, the Government propose to make provision in the Calf Subsidy Scheme for the existing Northern Ireland exemptions to apply.
The estimated saving resulting from the removal of the £10 increase would be £34 million in a full year. But as I

have explained—and this is important—the removal of the £10 will be a gradual process and in 1975–76 the total payment of calf subsidy is expected to drop by less than £4 million. Even when the full effect is felt, this should be more than offset by the firmer prices for calves and stores already evident in our markets and the improved returns from the fatstock market as a result of the measures recently taken by the Government.

1.7 a.m.

Mr. Michael Jopling: We are grateful to the Minister for explaining in outline the provisions of the scheme. I begin by declaring an interest —an interest which I have declared many times before in the House—in that I am involved in farming and run a beef operation.
I wish to raise three specific queries about the details of the scheme before I come to its general features. In regard to paragraph 4 of the scheme under "Rates of subsidy" on page 2, will the hon. Gentleman explain why under heading (b) it was necessary to itemise the amount of subsidy to be paid on a calf
 born before the day on which this scheme comes into operation "?
As I understand it, the original scheme which we passed as amended last year permits the payment of calf subsidies of £16·50 for a heifer calf and £18·50 for a bull calf. But why was it necessary to put it into this scheme when, as I understand the situation, up to the date of the order it would be natural for these rates to continue to be paid? It seems odd to have to put in a reaffirmation of what the House has already passed.
What will be the last date for fat cattle to qualify for the old high rate of calf subsidy which is stated to be 1st April 1976? Will the Minister explain what will happen when a number of calves qualify for the calf subsidy just before 1st April 1976 since almost certainly they would be calves born after that date on which the order conies into effect? I believe the Minister did not say on what date the order will come into effect. We shall come to that most important question in a moment, but I am sure hon. Members will wish to ask when the new order will come into effect.
It seems to me that some calves are likely to qualify for the higher rate of


subsidy, particularly calves under barley beef arrangements, which in some cases —not in many cases, but in some—come to maturity when they are nine months old. It would seem to me likely that some of them born after the opening date will qualify, which seems strange.
My final detail point relates to Paragraph 4(e) on page 3 of the scheme. I want an assurance of what I suspect is the truth. Anyone reading this sub-paragraph without a great deal of care might be tempted to feel that a calf which, at any time shortly before it had been offered for certification, had been in contact with a cow or any other animal which had brucellosis might conceivably be ineligible for the calf subsidy. As I read this provision, that is not so. At least, I hope I am right. I believe it applies only to animals which have been in contact with other cattle which the Minister has taken into his own hands under the compensation scheme. In the broader aspect, if a person had a cow which was not involved in any of the brucellosis eradication schemes and which had brucellosis, he might feel wrongly that his calf could not become eligible for a calf subsidy under the changes which are proposed.
I should now like to talk about the general effect of the changes which we arc debating. One is bound to feel "Here we go again." Here we have the Government once more altering the calf subsidy rate and proceeding, as they have over the last 12 months, in a series of lurches and stop-goes which have been a feature of the Government's beef programme particularly over the past year. In my view, no section within agriculture has suffered more than the cattle breeding sector in the last 12 months by not knowing what was the Government's policy. We have seen the most extraordinary repetition of policies being announced in one month and then completely rescinded and changed back before long. Indeed, the present Minister in many ways would make the grand old Duke of York look like a fairly stable person.
Since the election in February 1974 when the present Government came to power, we have seen an extraordinary repetition of lurches to and fro in the cattle breeding industry. In March of last year, for instance, the Government refused to increase the United Kingdom

target price for beef in the same way that the rest of the Community was doing. They increased it by only 6·3 per cent. Yet by June they had agreed to fall in with the rest of the Community by increasing it by another 10·3 per cent. This all falls in with what we are doing tonight in connection with the calf subsidy U turn.
The Minister of State will remember that in March last year his right hon. Friend came to the House and announced that he was abolishing the intervention system. Yet in October he came to the House again and told us blandly that he was himself an interventionist. He dressed it up in another name, calling it the private beef storage scheme, but it was still a fact that he had suddenly, in the course of about seven months, done away with intervention and then reintroduced it.
Again, the cattle breeding sector found itself in March last year wholly without guarantees, and then, at last, after pressure from this side of the House, we had a guarantee for beef again, albeit at a poor level.
The calf subsidy has suffered a similar fate. In March last year the Minister said that he would put up the subsidy by £10 a head, yet tonight we are asked to preside over the removal of that £10.
The importance of all this lies in the fact that the cattle breeding sector of agriculture is the longest-term of all. One cannot breed and rear cattle anything like as quickly as one can breed and rear in any other sector. Pigs, poultry and sheep are all a much quicker proposition. The Minister must understand that it is useless for him to go on with these alterations in Government policy in relation to the cattle breeding sector.
I come now to the vital matter with which the hon. Gentleman did not deal in his opening remarks, namely, the date on which it is intended that the scheme shall come into effect. In my view, the scheme must not come into effect until after the spring calving season is over. Indeed, it is essential that it does not come into effect until at least the end of May this year. If we are to have the scheme at all, let it come into effect on 1st June, for in that way it will be much easier to administer and, above all, it will be fair to the industry as a whole.
If the scheme were to come into effect at the end of March—or, even worse, sooner than that—any calf born before the end of March would qualify—I think that this is right—for the higher rate of subsidy, with the extra £10, but any calf born from 1st April onwards would not. The change would come right in the middle of the spring calving season, and when the moment came, in eight or 12 months, when farmers applied to have their young cattle certified for the subsidy, there would be a great number of disputes.
Some farmers would be tempted in those circumstances to suggest that their calves had been born in March when, perhaps, they were born in April or even May. It is very difficult for a calf certification officer to be able to say with certainty when a calf was born, and I can envisage a great many disputes arising unless the Minister agrees to put the change-over date at the end of May, when the bulk of the spring calvings will be over.
It is fair to put the date at the end of the spring calving season for another reason. Since the extra £10 came to he available for calves born after 30th October 1973, herds which were predominantly involved in autumn calving have now had two full seasons of calves born and qualifying for the extra £10.
So far we have had only about one and a half seasons of calving in herds where the calves were born in the spring. So if the Minister were to "switch off" the extra £10 at this time of the year it would mean that he would unfairly jeopardise those farmers who very often come from the more difficult areas where the land and climate are not so good. They would find that they did not have the advantage of the extra subsidy over two full seasons, unlike those herds with autumn calving. If the Minister will agree to bring the scheme in on 1st June he will be making the best possible job of a sad and sorry affair.
My principle worry about the impact of this reduction of £10 in the subsidy is the effect it will have in the early years. It will come as a blow in the hill areas. Cattle breeders in the hill areas have had a very difficult time this year. The Minister did not increase the hill cow subsidy, and here he is reducing the

calf subsidy by £10 as well. These breeders will therefore have had two blows in one year. Take as an example the man in the hill areas that 1 represent in Cumbria and the North-West—although this situation applies to many other areas. The man who breeds cattle predominantly will see that his neighbour who breeds sheep has had a reasonable increase in the guarantee price for lamb and wool in the price review and an increase in the hill sheep subsidy. He therefore finds himself at a great disadvantage by comparison.
There has been a great deal of concern expressed in the hill areas such as I and the Minister both represent. A delegation came from that area to London to protest to the NFU about the lack of help for the hill areas. I know that the deputation also met the Minister in his constituency over the weekend. I hope that the Minister of State will be able to say something helpful for those who will be hit by the reduction.
May I read a letter from a constituent of mine who was a member of that delegation and who saw the Minister. He says :
I contend that the Minister has practically seen to it that 1975 will be another disaster year for us. He cannot know that inflation also hits cow enterprises ".
He goes on to make a very potent point.
 Look at the Minister's own hill farm—profit in 1973. £12.000, loss in 1974. £7,000. And this is attributed to the hill cows on a much kinder farm than most of your hill farmers have.
He is refering to my constituents. I hope that this illustrates the way in which the order will hit the people in the hills whom the Minister was most anxious to help.
I turn now to the effect the £10 reduction will have on the industry as a whole. Recently we have had quite disastrous calf slaughtering figures. From the official figures that come from the Ministry I see that during the four weeks un to the end of February—I believe that is the last period for which figures have been published-52,900 calves were slaughtered, when only 19,900 calves were slaughtered in the comparable weeks a year before. That is a serious increase in slaughterings.
As the Minister has rightly said, we are in a situation in which during the


past week or two beef prices have increased dramatically. The Minister gave the figure of £2 per hundredweight. I should have thought if he were to make inquiries he would find that that is a good deal less than the price has risen over the past few weeks. That demonstrates that as a result of the Government's policies and as a result of the tremendous calf slaughterings of last year —we repeatedly warned the Government about the figures—we are beginning to see a shortage of first-class quality beef. I ask the Minister to tell us whether he is absolutely sure that it is wise to cut the subsidy in this way. It is inevitable that by cutting the subsidy more calves will go for slaughter than would otherwise have gone. With the shortage of beef which some meat traders are already predicting for the months ahead, and given the rise in beef prices that we have already seen, I am wondering whether the Minister is wise in the course that he is taking.
I now turn briefly to the effect that the reduction will have on the milk industry. I understand that the majority of dairy heifers do not qualify for the subsidy. The bull calves which are produced by the milk industry provide around 70 per cent. of beef supplies in this country. The Minister will know that figure well. He also must know that it is the sale of bull calves which provides a very important and vital part of the income of dairy farmers. The reduction of the subsidy must inevitably mean that calf prices will be lower than they would otherwise have been. The £10 removal of bull calf sales from the income of dairy farmers must, to a fairly large extent, offset the extra 5p a gallon which was added to milk at the recent price review. The milk industry is already seriously depressed. There is a shortage in the supply of milk from our home sources. As the Minister knows, not enough milk is being produced and hardly any butter is being produced. That is a serious matter which has cost us dearly on our balance of payments over the past year.
We are seriously concerned by the effects of this order. We shall listen carefully to what the Minister says. I cannot at this stage advise my hon. Friends to vote against this measure, but we shall be listening extremely carefully to what the Minister says. I hope very much that

for once our warnings will be heeded and that he will answer our questions when the time comes for him to speak again.

Mr. Deputy Speaker (Mr. George Thomas): There is one hour and two minutes left for this debate and many hon. Members have stayed to this late hour to participate. I hope that hon. Members will bear in mind their colleagues when they are called.

12.29 a.m.

Mr. Charles Morrison: Like my hon. Friend the Member for Westmorland (Mr. Jopling), I start by declaring my interest. As someone whose calves are produced almost entirely from an autumn calf herd I support strongly what has been said about the importance of the current scheme continuing until 1st June to safeguard the position of the spring calf herd. It is often the case that there is a right time and a wrong time to take action. By increasing the calf subsidy last year it struck me then and it strikes me now that the Minister did the wrong thing at the wrong time.
After a great deal of nagging and pressure from the Opposition, the Minister realised that the beef situation was becoming serious. Instead of worrying about the low end price that the farmer received for beef at that time, the Minister intervened at a much earlier stage in the production chain. In doing so he forgot that it is the end price which determines prices further back in the production chain. Consequently, the increase in the calf subsidy was no help to the fattener, which was proved by the fact that the Minister had to take further action later in the year to support beef, but again only after a great deal more damage had been done to production potential and to farmers' incomes. The increase in the subsidy was of only the smallest assistance to the calf producer, whose return is affected above all by the end price received by the fattener.
The consequence of the Minister's ineptitude last year was, first, the hardship felt by all beef producers and, secondly, the high rate of calf slaughterings, which is still continuing. My hon. Friend the Member for Westmorland (Mr. Jopling) quoted the figures for the last four weeks. I will quote the figures from the beginning of the year up to 22nd February. This year just under


99,000 calves have been slaughtered, compared with just under 36,500 in the same period last year. In the year since January 1974 calf slaughterings are up by 300 per cent. Yet, in the face of those figures, the Minister now proposes to reduce the subsidy. Again, it strikes me that he could be acting at the wrong time, albeit doing what in the longer term may be the right thing.
Is the Minister convinced that the confidence of farmers will not take another knock in the face of the subsidy reduction? One wonders whether the Government are serious about the expansion of agricultural production. Has the Minister studied the December returns? Has he seen, for example, that the number of calves under one year old decreased by 107,000? Has he noticed the fall in the breeding herd and the decrease in the dairy herd? The beef herd has increased, but that by itself provides a relatively small proportion of our beef requirements. Surely the likelihood in the light of the calf subsidy cut is that a still greater reduction in the herd potential will occur.
I presume that the Minister has read the comments of the President of the National Farmers' Union following this year's price review, when he said:
 Unless more is done to restore profitability in the near future, home food production will dwindle at the expense of the whole nation.
If I were the Minister and had read that, I should be most concerned, not just about farmers' returns but about the potential for beef production for the benefit of the consumer next year and thereafter. I should be even more worried as a result of this ill-timed scheme.

1.35 a.m.

Rev. Ian Paisley: I shall speak on the order as it affects the farmers of Northern Ireland. The benches occupied by those representing Northern Ireland in proportion to all other parties are more than full tonight for this important debate. It is to be regretted that this order is not being debated at a time when other hon. Members could be present, because it is a debate of the utmost importance to the farming community. Northern Ireland farmers are especially affected adversely

by the order. As the Minister is aware, a large part of the cattle industry in Northern Ireland is in the hill country and, as the previous speaker has said. hill country men are not receiving further benefit at present, although payment is being brought forward from October to March. Now they will be adversely affected by the removal of this subsidy.
I was interested in what the speaker from the Conservative Front Bench said tonight, that constituents were able to meet the Minister concerned. Unfortunately, we in Northern Ireland suffer under some unwritten law that none of our constituents can ever get to the ear of the Minister of Agriculture to put their case for the farming industry in Northern Ireland. Right lion. and hon. Members from Northern Ireland resent this. It seems to us that Members from Northern Ireland here are second-class Members and can never get the ear of the Minister for their constituents so that he can hear what happens there. The situation has been exacerbated by the fact that the Minister of Agriculture paid a flying visit to Northern Ireland and in such a way that one would have thought that he did not want anyone who would have put the situation to him to meet him. I received a brief note of two lines to say that he would be in my constituency, but where. from Portrush to Carrickfergus from the Bann to the North Channel, I was not even informed.
Many farmers in Northern Ireland are outraged by the fact that they cannot put their case to the Minister directly. They feel that that must be remedied.
This calf subsidy order will seriously affect the cattle people of Northern Ireland. If he is to proceed with this, it will be another blow to the farmers and cattle men of the Province. I am afraid that here in Whitehall the serious situation of the farming community is not going home in its proper measure to the Ministers concerned.
It is all very well for the Minister dealing with agriculture in the English context where agriculture is a very small part of the industry of the nation, but in Northern Ireland we have agriculture as our basic industry. It is the first industry in Northern Ireland it employs more people, as do the industries which stem from it, than any other industry so that


if agriculture is adversely affected, the whole population and the whole country are affected.
I would make a plea to the Minister to be prepared to hear directly from our constituents on this important matter and to realise that there is deepening resentment building up there. The farming community in Northern Ireland have always been most peaceful members of the community and have gone about their business in a peaceful manner. The farming community have been the life and soul of Ulster. They have been the steadying element in the community in the rural districts. Yet, today, farmers are on the roads. They are blocking roads, stopping traffic and engaging in civil disorders. The reason is that they feel that their case cannot be put to the Minister of Agriculture at Westminster. As their representatives in this House, we feel extremely concerned about it.
I am glad to have this brief opportunity to ventilate the concern of the farming community in Northern Ireland. I do not happen to be the spokesman for our group, and I know that if I speak any longer, he will pull me down into my seat. Rather than have that happen, I bring my remarks to a conclusion. But I trust that the Minister will listen to the voice of the Ulster farming community.

Mr. Deputy Speaker: Will the hon. Gentleman tell me whether it is a secret who is the spokesman for his group, because I have never been informed?

Rev. Ian Paisley: With pleasure, Mr. Deputy Speaker. Our spokesman on agriculture is my hon. Friend the Member for Londonderry (Mr. Ross).

1.40 a.m.

Mr. Geraint Howells: I am grateful to the Minister for explaining the scheme, and I have to declare my interest in that at times I rear a few pedigree Welsh black calves.
Many farmers have been through a difficult time over the past year or two. But I felt that we were at last beginning to see the light at the end of the tunnel after this year's price review. However, the drop in the calf subsidy has come as a great disappointment to me and to others, presenting, as it does, another stop-go policy in the livestock sector of our industry.

Farmers will think that we are going back to the days when the Minister did away with the intervention support system. That was only a few months ago, and we do not want to see a repetition again this year in the livestock sector of the industry.
In my view, the £10 reduction for each calf is a severe setback to the growing confidence of the industry. It is about time that there was some continuity introduced into the price review award which takes place every year and into the support system.
Let me give the House a few figures to illustrate the inconsistency that there has been over the past 10 years. The bull calf subsidy for 1964 was £9·75. In 1965–66, it went up to £10·25. In 1967–73, it went up to £11·25. In 1973–74, it dropped. This was due to the last administration deciding to reduce it from £11·25 to £8·50. From July 1974, it went up again by £10 per head. But here we are again, within nine months, experiencing a proposed reduction of £10 per head for every calf. To me, that is not good policy. It is bad planning.
It is interesting to compare the slaughtering figures of 1974 with 1973. In January 1974, there was a 67 per cent. increase in calf slaughterings. In February, there was an 81 per cent. increase. The trend was moving upwards all the time. In March 1974, the increase was 115 per cent. In April, it was 123 per cent. In May, it was 157 per cent. In June, it was 267 per cent. In July, it was 255 per cent., when we had the extra £10 per calf. In August, it went up to 310 per cent. In September, to 269 per cent. In October, to 315 per cent. In November, to 287 per cent. In December, to 223 per cent. But worse was to come. In January of this year, the figure went up by another 171 per cent. compared with January 1974, and, in the first few weeks of February, 27,000 head of calves were slaughtered. The level of calf slaughterings during 1974 was two or three times greater than in the previous year. The trend is continuing and getting worse.
Let us consider the returns to the farmers, especially to dairy farmers. In 1973 the sales of calves averaged £50 and over per head. In 1974 the price dropped to £20 per head. In February


1975, only a month ago, it came down marginally to less than £14 per head. I disagree with the Minister, who said that the prices of store cattle and calves were improving in the markets. Last week the average price was only £13·24. No wonder the farmers of Britain are worried about a reduction in the calf subsidy system.
Over past months city dwellers have become aware of the rumblings in the countryside. A normally placid section of the community has been roused to protest. There have been tractors in the streets and blockades at the ports. We have heard true stories of calves being sold for 10p each—in some cases 8p—and of farmers becoming bankrupt. That is a fact. The British housewife has suddenly become aware of the British farmer. In short, agriculture has been on the brink of a real crisis for too long for the well being of Britain as a whole.
I turn now to the dairy farmer and the effect of the prices that I have quoted on the milk producer who will now be selling calves. A drop of £30 on average on a calf is equal to at least 3p per gallon on milk. This is a classic example of robbing Peter to pay Paul. Why does the Minister give with one hand and take away with the other?
Many farmers in Britain breed dairy herds. A Friesian breeder is not entitled to the calf subsidy on a heifer calf. If, after a time, he decides to sell that heifer at the fatstock market, he will not qualify for the calf subsidy, although he will gel the intervention support price. He does not qualify if the animal is alive, but if he sends her deadweight he will get both. I hope that the Minister will look into this matter. Farmers are being penalised. Something should be done to help them in the near future.
I have already quoted figures showing that slaughterings are increasing and that sales are going down. The added disappointment of a decrease in the calf subsidy can only depress the market further, cause consternation among farmers, and lead eventually to a shortage of beef in this country.
Many people may not believe what I am saying, but I am afraid that it will be true in a few years. I believe that the housewife will have to pay a very high

price for the Sunday joint within the next five years due to the lack of foresight on the part of the Minister.
We do not propose to divide the House tonight. [An HON. MEMBER: "Why not? "] That is a good question. But there are not many hon. Members here to support us.
I hope that the Minister will reconsider his decision. I am against the reduction of £10 per head. This has happened in 12 months. It is a great pity that the farmers of this country must suffer again due to the stop-go policy of the Government.

1.50 a.m.

Mr. Wm. Ross: The scheme and the changes in the calf subsidy over the years are simply the outward signs of the constantly changing thinking and the constant nonsense that have bedevilled the meat industry in Great Britain over many years.
On page 1 we read that the Minister of Agriculture, Fisheries and Food, the Secretary of State for Scotland and the Secretary of State for Wales may act, but unfortunately, there is no mention of the Secretary of State for Northern Ireland. However, on page 2 we read in paragraph 4 that the reference is to the Minister or the Secretary of State for Scotland. This seems strange. Why is it necessary to have three Ministers in the first instance and only two in the second? Is there any need to mention any Minister other than the Minister of Agriculture,who is the person in charge of agriculture in this country? It is a small issue, but it was raised on the last occasion the calf subsidy was discussed.
Carcases become ineligible because of infection, by TB or brucellosis. Can the Minister confirm that the calf subsidy is taken into account whenever compensation for these carcases is assessed? After all, £18 or £19 is well worth having, and the farming community would like to be assured that full account is taken of the subsidy when paying this compensation.
Paragraph 4(3) mentions horned cattle, especially in relation to Northern Ireland. Until now because of the law in Northern Ireland, since 1965 horned cattle have not qualified for the calf subsidy. The change in the scheme will mean that bulls of all breeds, provided that they have enough blue blood to qualify for the herd


book of their breed, will qualify, but why are only Hereford and Charolais heifers included? Have the breed societies of all the horned cattle in Northern Ireland expressed their willingness to accept this limitation on the breeds of horned cattle for show purposes? If so, I find it very strange, because many breeds, including Shorthorns, are sold with horns attached. This may not be important to anyone except breeders of pedigree cattle, but I should like an answer.
The scheme is to come into operation on the day after it is made, which I take to mean 14th March. Why is that? The Ulster Farmers' Union Fatstock Committee recommended at its meeting this week that the date should be 30th May. The reason is to catch the spring calves, especially on upland farms where the suckling herd is the basic unit.
If the Minister decides to go ahead and fix tomorrow or the next day as the qualifying date, he will find that very many calves will have been born in Ulster and the rest of the United Kingdom within the last few days and strangely few will be born in the next fortnight. I am sure from the Ministers expression that he is well aware of that. It is a direct result of taking this strange time, right in the middle of the calving period, to make the change.
The calf subsidy increase of £10 had a starting point in October 1973. That meant that two lots of autumn and winter calves qualified. But now only one lot of spring and summer calves will qualify. The Minister should know that those late spring and early summer calves are the calves which come from the herds whose owners most need this help, namely the small upland herds. That is the sector of the farming community that has been hardest hit during the last 12 months.
It has also been decided to extend, the time during which subsidy will be paid on carcases, but it would appear to me that the length of time allowed is too short. It takes cattle varying periods to grow from one day old on to steak. In the case of carcases there is a period of 154 months during which the extra £10 will be paid, but in the case of calves the period is 164 months. What is the reason for the difference? Steps should be taken to correct the matter.
I want also to ask the Minister how the figure of £4 million has been arrived at.

Has the Minister taken into account the fact that we are in the middle of the spring calving, and that at this time of year more calves are being born than at any other time? This is double the average number of calves. That is the only way in which the figure of £4 could have been arrived at.
Everyone has said that we should not vote against this scheme, but I am not so sure. Three grave inequities arise from the scheme. There is the inequity in relation to the different breeds of horned cattle ; the inequity in the period of time allowed, comparing carcases with calves ; and the grave inequity arising from the fact that two crops of winter calves and only one crop of summer calves qualify for the £10. This is a ridiculous time to bring in this scheme.
Last year there was an increase of 60,000 in disposals of cattle in Northern Ireland. That increase was made up entirely of cows and heifers. Anyone who knows anything about farming life will realise that such an increase is a clear indication of a lack of confidence. The fact that calf subsidies have yo-yoed throughout subsidy legislation is no basis for future planning. It may pay only a few pounds per calf, but that is a fairly large sum for a small farmer. If farmers are to have any confidence for future planning it is essential that changes be made slowly, so that farmers know the way ahead. Nowhere is this more important than in meat farming.
The Minister should indicate that he is willing to take this scheme away and bring it back properly constructed and timed.

1.59 a.m.

Mr. Robert Hicks: I think that we are all agreed on the Opposition side that the greatest single requirement of the agriculture industry at present is a restoration of confidence. This can surely best be achieved by pursuing a stabilised programme. Yet, as many speakers have pointed out, the agriculture industry has been subjected to constant change, and within the farming industry the livestock sector is particularly vulnerable.
My first point concerns the effect that the changes in the level of the calf subsidy will have on the hill areas. Various local and regional points have been put, and I want to speak for Cornwall. We


have all agreed that the hill farmers have had a difficult 12 months, largely due to the steep fall in the price of beef last year and the increase in feed costs, which was accentuated during the winter months. The hill farmers had to face the additional problem of a shortage of fodder. The hills are the major supplier of young stock for the beef herd, and it is necessary to restore confidence in this sector.
Secondly, there is the effect that the variation will have on the dairy sector. The Minister must remember that 70 per cent. of our beef comes from the dairy herd. Unless we are very careful, within the next few months the dairy farmer will run into financial difficulties. The increase that he is to receive in the price of milk is only 0·8p per gallon. We already have a shortage of milk for manufacture. Our cheese and butter factories are working below capacity. Therefore, there is a need to encourage milk production. We must also bear in mind that the dairy farmer depends upon the sale of his bull calves for an important part of his income.
My third point concerns the need to take into account that, whereas the autumn calf herd will qualify for two goes, calves born in the spring will not. Therefore, it is important to see the matter in the context of a full season, especially in view of the necessity to build up the United Kingdom beef herd. In the past few years many producers have switched to spring and late spring calving. That makes sense. In addition many of those who spring-calve are in the more difficult areas, in the hills.
There is a continued high level of calf slaughterings. In the last week of February 15,400 calves were slaughtered, compared with 5,800 and 3,100 in the corresponding periods of 1974 and 1973. Prompt removal by the Minister of the £10 supplementary calf subsidy, which will reduce the rate for steers to £8.50 and the rate for heifers to £6.50, will hardly encourage a recovery in calf-rearing. Thus numerous potential beef animals born this spring could well be subsequently slaughtered as calves.
I therefore ask the Minister to extend the period of this scheme so that it covers

the whole of the spring calving season. This is not a matter of merely an administrative requirement. It is an important requirement, and it is certainly backed by all those who understand farming. All too often decisions have been made by various Ministers not necessarily of the Ministry of Agriculture —on the basis of administrative expediency. Let us hope that on this occasion the real practical needs of the industry can take priority over administrative convenience.

2.5 a.m.

Mr. James Killedder: My hon. Friend the Member for Londonderry (Mr. Ross) has dealt with detailed points arising out of the order. I wish to deal only with the generality of it.
I join with other hon. Members in warning the Government that farmers have had enough of political parties saying one thing when in Opposition and another thing when in Government. I warn the Government, too, that farmers will no longer be deceived by devious talk and by a "stop-go" agricultural policy which has brought many farmers, certainly in Northern Ireland, to the verge of disaster. They have taken to the streets and demonstrated in Northern Ireland.
I am sorry that no Minister from the Northern Ireland Office is on the Front Bench to reply to the debate and so emphasise the importance of agriculture to Northern Ireland.
We are in the quite ridiculous position where the Government of the day at one time urge expansion and provide an incentive to the farmer ; and then, when the farmer responds in all good faith with maximum production, the Government reverse their policy, take away a major part of the financial help which encourages that production and leave the farmer with all his plans awry and bearing very heavy losses. That is a strange way to treat those whose industry and efficiency save the importation of too much food from abroad. It has happened in respect of pigs, eggs, milk and beef. Now the farmers who are in beef production and have suckler herds will get another grave blow as a result of the variation of the scheme, which reduces the calf subsidy by £10 on each calf. This is a further hardship for the suckler herd


owners. I do not have the spell out their present plight.
I am afraid that this will lead to a cutback in beef. Is that what the Government want to see? If so, they should say so quite clearly. Are the Government interested in maintaining and increasing beef production? It is more than 22 years since the calf subsidy scheme was introduced. Then the subsidy was £5 for steer calves and £2 for heifer calves. Since then, as we all realise, the value of money has been dramatically eroded and the price of feedingstuffs has risen rapidly. As a result, the reduced subsidy proposed by the Government will be less than the value of the original subsidy. So much for progress, and so much for all the promises made to farmers over the past months and years.
All that farmers desire is a reasonable return on their investment and for their work. While all around them they see others clamoring for and obtaining increases in pay, they are expected, seemingly, to produce at a loss. It is in the interests of us all that we should have an expansion in beef production and not have to rely on overseas supplies.
Last year the Government put up the calf subsidy by £10. Now they are removing it at a stroke. Two years ago the then Conservative Government reduced the subsidy for the first time in the life of the scheme because, they said, there was a shortage of beef supplies which had increased market returns and had the effect of making the subsidy less necessary. The then Minister of State accepted that the calf subsidy had been a valuable production grant, improving returns at a key point in the production cycle when returns from end prices were not sufficient to bring about the necessary expansion.
I quote one agriculture spokesman in that debate. He said :
 at a time when we should be encouraging even greater beef production it is illogical to proceed by cutting some of the important production grants which are aimed at achieving an expansion. For this reason the Opposition "—
the Labour opposition—
 deplore the Government's decision to cut calf subsidy.
That was the hon. Member for Edinburgh, East (Mr. Strang) who is now the Parliamentary Secretary at the Ministry

of Agriculture. He is not on the Government Front Bench at the moment. He continued, in a slashing attack on the Conservative Government for cutting the subsidy :
 Therefore, I cannot see how the Government can justify a cut in the subsidy at the present time. The Government are under-estimating the effect which this will have upon agriculture. Time and again we have been exhorted to expand, but this attitude seems to have fallen away. We cannot blame the industry for beginning to wonder why the Government say, on the one hand, that we are desperately in need of beef expansion, and yet, on the other, cut the calf subsidy for the first time since it was introduced in 1952."— [Official Report, 4th April 1974 ; Vol. 854, c. 553–4.]
Perhaps I might put similar questions to the Government. Why are the Government reducing the subsidy? Is beef production too profitable? Are producers getting too much out of beef? That is not so. This is a ridiculous position. The farmers have had enough of it—certainly the farmers in Northern Ireland. For that reason I intend to oppose this scheme, and divide the House this morning. It is the only way we can prove our sincerity and determination to get a fair deal for the farmers. The Government are behaving like a drunken man, lurching from one side to the other, not knowing where they are going. The farmers do not want to be dragged along in such an erratic manner. Their livelihood is at stake and we in this House are here to protect them and help them. By doing so we will be helping all the people, especially the housewives.

2.13 a.m.

Mr. Bishop: I will deal first with the technical points raised by hon. Members and then with some of the more general points raised by Members who represent Northern Ireland constituencies and elsewhere. The hon. Member for Westmorland (Mr. Jopling) asked why it was necessary to put the amendment in the scheme. The answer is that the parent legislation under which the scheme was made embodies a subsidy rate and that cannot be reduced retrospectively.
In the past we have been putting the rates up. The significant date of birth was specified in the scheme, but on this occasion the date of operation will determine the significant date of birth so that the rates have been spelled out with reference to the date on which the scheme comes into operation.
I was asked why calves born after the date of operation of the scheme but certified as carcases before 1st April qualify for the higher rates. The answer is that the conditions relating to carcases, stage B, are different from those for live calves for stage A. Calves do not generally meet the conditions of eligibility as regards standards at stage B until they are about 12 months old. Second, the increase became payable at stage B only on 16th December 1974. Terminating the increase in April will mean that the higher rate will have been available to the producer at stages A and B for roughly the same period, about 16 months.
The hon. Member for Westmorland asked about brucellosis in relation to paragraph 4(3) of the scheme. The provision applies only to animals slaughtered under the brucellosis scheme which have attracted compensation since the compensation takes account of the value of the calf subsidy.
The hon. Gentleman also asked about the coming into operation of the scheme. This will be when the scheme is signed. The £10 addition was a temporary measure to which I shall return later.
The hon. Member for Devizes (Mr. Morrison) referred to the figure of calf slaughterings. These are higher partly because of the increased size of the beef herd. They are also higher because in recent years—especially last year—there was an unduly high calf retention. Current levels are not much different from the situation in the 1960s. The figures from 1966 to 1969 were very much higher than they were in the last year. Therefore, the trend during the year reflected some of the problems connected with the industry. The point is that confidence is returning to the industry and I believe that we shall see a downward trend in this respect in future as the market becomes firmer and prices rise.
Several hon. Members asked why the extra subsidy should not be retained longer to cover spring calvings. The £10 addition was a temporary measure agreed by the Council of Ministers in March 1974. When the new beef regime was settled in February this year, an undertaking was given that the increase would be discontinued as soon as the necessary

provision could be made. All calves born before the variation scheme comes into operation which are otherwise eligible will continue to receive the higher subsidy. The phasing out period will run from about eight months after the date when the scheme comes into operation.

Mr. Jopling: I am sorry that the Minister has not yet said when the scheme will come into effect. He said that it would come into effect when signed. I very much hope that the scheme will not be signed until, at the earliest, 1st April. Many of us regard that date as totally wrong and believe that it should be extended until 1st June. Will the Minister say whether technically it is possible for the scheme to await signature until 1st June? Will he give an undertaking that it will not be signed before 1st April?

Mr. Bishop: I do not think I am able to give that undertaking. In regard to Government policy it must be pointed out that until 30th June last year the maximum rates of calf subsidy were £8·50 on a male and £6·50 on a female. From July last the maximum rates were increased by £10. This was a dispensation given to us by the EEC Council of Ministers. The council agreed to it in March last and it was linked with the decisions that the United Kingdom guide price of beef should be increased to a lesser extent than in other member States and that the United Kingdom need not apply intervention.
The Commission's regulation implementing the decision ceased to have effect after 31st December last. When introduced it was envisaged that the outlines of the new beef regime would be clear by the beginning of 1975. It was hoped that the United Kingdom commitment to remove the additional £10 could be implemented and the new regime introduced at about the same time. But since the new beef regime was not settled by 31st December, action could not be taken in the United Kingdom to end the entitlement then. In order to extinguish the entitlement in United Kingdom legislation to the extra £10 on the day when the EEC legislation ceased to have effect, it would have been necessary to begin the parliamentary processes at the beginning of November 1974.
Until the new beef regime was settled in February of this year, the calf subsidy was in order, but it is an understanding of the new regime that the higher subsidy shall cease to have effect. The point is not where the subsidy comes from, whether it is a calf subsidy or a variable premium. The point is that the income to the farmer is assured, and this has been undertaken in the announcement by my right hon. Friend in February of this year. There are signs that the market is firming up and that new confidence is returning. The effect of this new assurance which has been felt in the industry is more than amply replacing the calf subsidy.
Hon. Members from Northern Ireland asked why pedigree bulls in Northern Ireland have not been eligible for the calf subsidy until now. All horned calves presented live for certification in Northern Ireland have since 1971 been excluded from receiving the calf subsidy. When hon. Members ask what action they might take, they should realise that these facilities which have been put into this scheme help the Northern Ireland producer considerably. They have been added, in agreement with the Northern Ireland societies, because some of these improvements get rid of the anomalies which have existed for some time and they represent a benefit to the Northern Ireland producer. The object of the exclusion is to enforce the general de-horning requirement introduced in Northern Ireland in 1965 in order to protect the live export trade, since horned animals could damage each other in transit.
Reference has been made to changes which have been made in the variable premium in Northern Ireland. The present Northern Ireland premium is 70p per live cwt. higher than the premium in Great Britain. This did not provide adequate protection to Northern Ireland producers when the market collapsed last autumn. So we have made a separate calculation of the premium for Northern Ireland to make sure that average returns to producers there are at the same level as in Great Britain, after taking into account transport costs which are assessed at El per live cwt. I ask hon. Members to remember that the scheme has the extras put in, besides the changes in the

calf subsidy level, in order to right anomalies at the request of their own societies.
A question was asked about the exemption from de-homing being limited to pedigree female Hereford and Charolais breeds only. The object of the exemption is to bring the calf subsidy legislation into line with the exemptions in de-horning requirements of the Northern Ireland horned cattle exemption order of 1967. This is what this provision does. This is another benefit to the Northern Ireland producer.
I have been asked why the increase applied at stage A a month longer than at stage B. The closing date of 1st April 1976 for stage B will mean that the higher rate per carcase which ran from last December will be available for just over 15 months. So we are not bringing the scheme to a sudden end. It will continue for some time yet, and indeed there are signs that the new beef regime is firming up.
In reply to the hon. Member for Londonderry (Mr. Ross), who asked about the exclusion subsidy on carcases of animals slaughtered in the course of tuberculosis and brucellosis eradication, the compensation is payable under animal health legislation on animals affected by tuberculosis or brucellosis where the owner opts to have the animal slaughtered by the Department of Agriculture. In such cases the subsidy potential of the animal is taken into account in assessing the amount of compensation based on the market value. It is not appropriate to pay calf subsidy in addition.
I come now to another matter raised by the hon. Member for Londonderry. In 1967 the Northern Ireland Government made an order under Section 20 of the Agriculture (Miscellaneous Provisions) Act 1965 providing for certain exemptions for pedigree bulls and pedigree females of the Hereford and Charolais breeds, considerd to be the main pedigree beef breeding herds in Northern Ireland, in order that these animals could preserve their traditional appearance. The numbers involved are quite insignificant so that the overall dehorning policy has not been affected. These exemptions have not so far been applied to the calf subsidy mainly because live bulls have only recently been eligible for the subsidy.
I was asked about the references to the Minister, the Secretary of State for Scotland and the Secretary of State for Wales on page 1. These references repeat the provisions of the parent Act, the Agriculture (Calf Subsidies) Act 1952, which enables those Ministers to make a United Kingdom scheme. The references on page 2 to which the hon. Member for Londonderry drew attention omit the Secretary of State for Wales because that Minister has no power to make the actual payments.

Rev. Ian Paisley: Are we to take it that the Secretary of State for Northern Ireland has no power to make them?

Mr. Bishop: That is a technical point of detail—I was asked about the various references to Ministers and Secretaries of State—and I have no information here about the position in Northern Ireland in that respect. I shall write to the hon. Gentleman to clarify the matter.

Mr. Wm. Ross: Under the parent legislation, was it not possible to have different schemes for various parts of the United Kingdom—for Northern Ireland, Scotland, England and Wales?

Mr. Bishop: I do not think that I can answer that question without knowing what the schemes are to which the hon. Gentleman refers. If he will write to me, I shall give him the information.
I was asked about hill farmers in Northern Ireland and elsewhere. The hill cow subsidies have been brought forward this winter, and the hill sheep subsidy, which affects many who also keep cattle, has been increased. Hill farmers will also benefit from the higher calf and store prices which are being made as the new beef arrangements increase confidence.
As regards the increased calf slaughterings and the return to breeders and rearers, we believe that this reduction in subsidy should have little or no impact on the level of slaughterings, and all eligible calves born until the scheme comes into force will qualify for the higher rate of grant.
Moreover, the general policy of the Government as expressed in the last few months, with the action taken from the implementation of the calf subsidy last

year, only a few weeks after we came to power—more than doubling the subsidy provided by the Conservative Government —together with the action taken in July, and in November, and the new beef regime, is bringing a new confidence to agriculture, as is shown by the price figures in the last two months. There have been quite substantial increases.
In the case of Friesian cattle, the figure in December was f10461 per head. In January it was £113·17, and in February £.125·06. For beef and dairy cross herds, the figure in December was £121·05, and in February it was £138·50. That is an indication of the growing confidence in the industry.
The Conservative Opposition, who were instrumental in our entering the Common Market, must realise that the Minister has had to do a great deal of negotiating in Brussels in order to bring back the package which he has presented to the House and to the farming community. Hon. Members suggest that farmers are not able to know from time to time what is likely to happen. There is no doubt that my right hon. Friend has been showing an awareness and sensitivity to the needs of the agricultural community. His success in Brussels has meant that we have now given a new confidence to the industry and have made good the ending of the fatstock guarantee scheme by the Conservatives, a move which took away deficiency payments and the confidence which is now being gradually brought back as a result of our policies.

Mr. Jopling: The Minister of State has been round these houses often enough without coming out with this hoary old chestnut once more. He knows perfectly well that when the Government changed just over a year ago we left behind a residual guarantee in the form of the intervention system. It was this miserable Government which took everything away and left the beef industry totally naked, without any form of support.

Mr. Bishop: That is hardly true, as the hon. Member knows—

It being one and a half hours after the commencement of proceedings on the Motion, Mr. DEPUTY SPEAKER put the


Question, pursuant to Standing Order
No. 3 (Exempted business)

Division No. 147.]
AYES
[2.31 a.m.


Bishop, Edward
Roper, John
Urwin, T. W.


Brown, Hugh D. (Glasgow, Pr)
Sheldon, Robert (Ashton-u-Lyne)
White, Frank R. (Bury)


Brown, Robert C. (Newcastle)
Snape, Peter



Dormand, Jack
Swain, Thomas
TELLERS FOR THE AYES:


Harrison, Walter (Wakefield)
Taylor, Mrs Ann (Bolton W)
Mr. James A. Dunn and


Loyden, Eddie
Thomas, Ron (Bristol NW)
Mr. Joseph Harper.


Noble, Mike






NOES


NIL



TELLERS FOR THE NOES:




Mr. James Kilfedder and




Mr. David Penhaligon

It appearing on the report of the Division that forty Members were not present, Mr. Deputy Speaker declared that the Question was not decided, and the business under consideration stood over until the next Sitting of the House.

Mr. Jobling: On a point of order, Mr. Deputy Speaker. On an occasion like this there is a precedent for the House to ask the Government what are their intentions. As I see the result of the Division, the Government have failed to get the scheme, and the higher rate of calf subsidy will continue because of the Government Whips' failure to get their supporters here.
The Conservative Party has taken no part in this Vote. I was a Government Whip for some years, and this sort of thing did not happen in our time. It is the Government's business to keep their supporters here. If the Government Whips arc incapable of keeping their supporters in the House to get their own business it is no fault of ours.
Will the Minister tell us what are the consequences of the vote and what the Government intend to do about it?

Mr. Bishop: Further to that point of order, Mr. Deputy Speaker, as I told the House earlier, on 21st January, the Council of Ministers agreed that the United Kingdom should continue the premium until the EEC scheme took effect and the Minister has, in anticipation of satisfactory adjustments to the beef regime, to which I have referred tonight, and to other items, said that he was prepared to discontinue the £10 supplement until the necessary provisions had been made. That was announced by my right hon. Friend on February 17th.

The House divided: Ayes 15, Noes 0.

I have reason to believe that the Government were right in expecting that the Opposition would not take the action they have. This poses problems with the Council of Ministers in Brussels, but I want to assure the hon. Member for Westmorland (Mr. Jobling), who raised the point of order, that it is the Government's intention to get their business through. They will take the necessary action to do that.

Mr. Jopling: Mr. Jopling rose—

Mr. Deputy Speaker (Mr. George Thomas): Order. May I make it perfectly clear that we are not pursuing that matter any further because there is other business before the House and I am following Mr. Speaker's practise of allowing one question and one reply from the Front Benches. This very week Mr. Speaker followed that practise so I hope that, having had their exercise, hon. Members will not want to pursue it.

Orders of the Day — EUROPEAN MONETARY CO-OPERATION FUND

2.47 a.m.

The Minister of State, Treasury (Mr. Robert Sheldon): I beg to move,
That this House takes note of Commission Document R/3594/74 and of the Government's intention, while co-operating in the improvement of monetary consultations in the EEC. to question the suitability of the organisational measures proposed.
The EEC document under discussion is a draft Regulation, the purpose of which is to enlarge the functions of the European Monetary Co-operation Fund to give it a much larger role in consultation on


monetary problems between member States.
The draft regulation was introduced by the Commission to the Council of Finance Ministers in December 1974. The whole purpose is to achieve a greater consultation within the EEC on monetary matters.
If I might say something about the history of those consultations, perhaps I might start by pointing out that at the outset the Monetary Committee was set up under the Treaty of Rome, with a committee of officials, its purpose being to report on the monetary and financial situation within the Community and they, of course, issue an annual report, as those interested in these matters will know.
On 8th May 1964, there was set up a Committee of Central Bank Governors. The aim was to take on consultations on policy matters, including credit, money, and foreign exchange markets. The other main purpose of this Committee was and is to provide for the exchange of information and to produce the greater consultation which so many believe to be valuable in this.
Following that we had the setting up of the European Monetary Co-operation Fund, established in April 1973. Its initial responsibility was to manage the snake as well as the short-term credit facility. The position remains that it is hoped that it will have the possibility of undertaking work in connection with the joint Community borrowing scheme.
The snake and the short-term credit facility were the initial responsibilities of the European Monetary Co-operation Fund, but the activity in this regard has been reduced considerably because of the floating of the pound, the Irish pound, the lira and the franc. The EMCF is managed by a board of governors. The members of the board are the central bank governors, plus a Luxembourg representative. At present, it has no staff. The Bank of International Settlements provides the secretariat, and the meetings of the EMCF are held in Basle.

Mr. John Roper: My hon. Friend referred earlier to the function of the EMCF in managing what remained of the Community snake. Is it also responsible for managing the affairs of those non-Community countries

which have linked their currencies to the snake?

Mr. Sheldon: Yes. The consultations tend to be rather more informal with those countries outside the Community, but the EMCF handles that side as well.
There are premises in Luxembourg set aside for the EMCF. They are not yet occupied. The building is there, and many hope that it will be occupied eventually by the EMCF.
The Commission claims that, despite the progress on consultation, there is still this lack of effective co-ordination of monetary policies within the Community and that with the four currencies floating independently, and that with the foreign exchange market as well as the international capital market being somewhat disorganised, there is a need, which we accept, for close consultation on these matters with all the partners.
That background leads on to the proposals before us. They are that there should be a greater opportunity for consultation on these monetary policies, including the external monetary policies, credit policies and similar matters between the member States. The aim is that there should be a greater and more adequate exchange of information, and it is hoped that this body will be able to make recommendations to the central banks on the monetary situation and exchange rate relations. The intention is that the EMCF will deliver opinions to the Commission and that there will be established a director-general with day-to-day management responsibilities.
The impression that I have is that it is likely that the Council of Finance Ministers will consider this draft regulation on 18th March. If this regulation were to take effect, the consequence would be rather more organisational and procedural than substantive, that these monetary questions should be concentrated in the EMCF rather than divided, that it might be more systematic, as the proponents of the change claim, and that the EMCF could lead to better consultations with direct recommendations to the central banks and an influence on the Commissions.
Anyone who has studied the problem knows that it is at present somewhat difficult to get genuine prior consultations before making a number of the


decisions which each member State seeks to initiate on certain occasions. But it must be emphasised that there is no obligation in the regulation to accept the advice arising from this prior consultation.
If this regulation were to go forward, there would be no new legal obligations on the United Kingdom ; nor would any United Kingdom legislation be required.
Everyone will agree that the present consultations on monetary matters are imperfect. But it is not difficult to see the reason why. The monetary situation is under considerable stress at present. The rapid rise in oil prices and the consequential financial flows have made the co-ordination of monetary policy very difficult. Despite that, we got the Joint Community Borrowing Scheme, and assistance was given to Italy.
Currently we are considering whether structural changes in organisational methods can lead to an improvement. That is hard to assert with any great confidence. The EMCF board is really the central banks themselves. The important role of the Finance Ministers also needs to be involved. Because of that, Her Majesty's Government are a little more critical than they would otherwise be of the proposals.
Discussions which have taken place at official level show that within the member States there is considerable opposition to this organisational change, but not all countries have expressed their views on these matters.
Most people would agree that the monetary consultations carried out now are unsatisfactory. Indeed, most of the member States concerned are unsure that the organisational changes proposed provide the best way out.
It is unlikely— in fact, extremely unlikely— that the draft Regulation will be adopted as it stands. Our view is that practical ways of improving monetary consultations are the right way to proceed. I believe that that view will be echoed by a number of other countries.
This general critical attitude, where we accept the value of consultations on monetary matters and seek to improve their quality in more practical and direct ways, is the method by which we would choose to proceed, and that method might

have considerable support among the member States.

2.58 a.m.

Mr. John Davies: I was interested to hear the Minister of State's views on the proposed restructuring and enlargement of the role of the European Monetary Co-operation Fund. I have no difficulty in accepting the motion and taking note of the Government's intentions regarding this instrument.
It would be impossible to divorce the proposal from the history and background of this institution. After all, the institution was seen at a time when the prospect of monetary union in the Community seemed perhaps more real than today. It was seen as the instrument by which, in due course, the monetary union would be translated into something in the nature of a European Community central bank. It is with that in mind that one has to consider changes which are now made regarding both its structure and rôle.
I am very much wedded to the prospect and objective of the attainment of monetary union in the Community, but I have always felt that that was realistic only in terms of a preliminary movement towards much greater economic union, much greater assimilation of the economies by diverse methods that the Community should produce during the course of its development. I have always wondered whether it was right to put the European Monetary Co-operation Fund into a position that was incompatible with the economic development of the Community generally.
Indeed, for me the principal point at issue is both the EMCF's rate of development in relation to the Community generally and its relationships. If in due course it is to be the instrument it was intended to be, it will need to have a proper relationship with the other institutions of the Community. This seems to be essential if, as I expect, the development of the Community policies in a variety of economic and social matters reposes essentially with the Commission and with the Council of Ministers as a decisive force. It is right, in all the circumstances that the Commission, too, should be broad proponents of monetary developments, using the fund at the appropriate time as an instrument of its intentions.
That seems to be a proper way for this operation to develop and therefore it seems that that acceleration of the fund's activity which, despite anything that may have been said in the papers before us, is implicit in these proposals, must appear at least to be out of place with the effective development of the Community. Like the Minister, I have absolutely no doubt that there is a need for both greater cooperation, concentration and greater convergence, to use the regular expression in this and other aspects of the Community's work. Personally, I am of the opinion that it is improbable that developments towards an effective Community will be attained while, for instance, individual countries operate in their own transactions with the Community sometimes with no fewer than three exchange rates.
This phenomenon obviously requires some changes and effective co-ordination of the monetary relationships within the Community to bring about anything that may be considered in any form an improvement in harmony and unity within the European Community. I sincerely believe that there is a great deal to be attained in this respect.
I am anxious, and I think that this anxiety is shared by many who are not necessarily concerned with the purposes of the Community, about the timing and implications of the proposal. We seem to to be moving towards a situation that can only become more and more intricate, both in relation to the nature of the instrument and its relationships. Therefore, I welcome what the Minister has said this evening about the Government's reticence in this respect. I note with interest that other countries are also anxious about the way in which this instrument is currently being put forward. It is necessary to show some reserve about the proposal.
I am always a little anxious when 1 see perhaps the name "director general" in an institution of this kind. It seems to imply that there will be a follow-up staff who, in the nature of things, will be looking for an outlet for their undoubted abilities, and that outlet may not be in conformity with the kind of development that seems to be proper in relation to this fund.
All that being so, I must sound a certain word of caution about the way in

which this fund is developed. I am glad to feel that that word of caution is reechoed from the Treasury Bench. I can only say that in these circumstances taking note of this instrument occasions me no difficulty, provided that the reserve which has been expressed is maintained.

3.5 a.m.

Mr. Nigel Spearing: I am sure that all Members present at the moment will join with me in protesting at the hour at which we are expected to debate this very important document and its predecessors. I shall deal with those in a moment.
This is the fifth item on the Order Paper today. I admit that the length of a Report stage cannot always be predicted with accuracy, but it is wrong, in view of the statement made yesterday by the Prime Minister, that we should be discussing this instrument at this hour.
Secondly, it is subject to the business motion limiting the debate to 1½ hours, whereas some of the other business that we have had was subject to no restriction. That, again, shows the contempt with which the Government are dealing with discussions on EEC issues that we have had over the last few months.
There is one other matter to which 1 want to refer before coming to the subject of the debate, namely, the preamble to the regulation, which refers to the proposal being based on Article 235 of the Treaty of Rome. This article provides that
 If any action by the Community appears necessary to achieve, in the functioning of the Common Market, one of the aims of the community in cases where this Treaty has not provided for the requisite powers of action, the Council, acting by means of a unanimous vote on a proposal of the Commission and after the Assembly has been consulted, shall enact the appropriate provisions.
As we know, at the moment this treaty is something of a written constitution not only for the Community but for this country, and anybody who is familiar with constitutions who sees a phrase like that at the end of the article will know just what it means. It means that if the Community and the Council think that they should take some powers which are not provided in the treaty, provided it is unanimous, and after consulting the Assembly— they do not have to take any notice of what the Assembly says— they can take those powers. This is one of the


regulations which come under that heading.
On might immediately say that that is the sort of innocuous expansion of the machinery which we have heard about from the Minister of State this evening. But why should that need a reference to Article 235, concerning powers? The Minister of State may have been rather less than frank. I may be mistaken in this. No doubt my hon. Friend will say, in his concluding speech, whether I am wrong. He has talked about the background to this document, R /3594/74, which we have in front of us, but I do not think he went back far enough, because this document— as stated in the preamble and in the explanatory memorandum— is an expansion of
 the functions of the European Monetary Co-operation Fund as set out in the founding Regulation…Explanatory MemorandaR/241/73 and R/731/73 …
supplied to this House on 10th April and 1st May 1973. They were presented under the previous Government.
The explanatory memorandum to R/3594/74 says that
The EMCF would become responsible for co-ordination of the domestic and external monetary policies of the EEC Member States and for the exchange of information on international capital and foreign exchange markets.
That sounds reasonable enough. The hon. Member spoke of the exchange of information, and so on, but if we look at the original instrument we come across something quite different. R /241/73 states, in the preamble
Whereas the purposes of the Fund will be to contribute to the progressive establishment of an economic and monetary union between the Member States of the European Economic Community, which in the final stages would be characterised: either by the total and irreversible convertibility at a fixed parity of Community currencies against each other or by the introduction of a common currency.
That is why the fund was founded, and it is now to be speeded up by the latest proposal. But I did not hear from my hon. Friend any reference to those specific objectives, nor was there much about them in the explanatory memorandum then. It says:
The fund will be concerned in its initial phase in the arrangements for operating the scheme to narrow the margins of fluctuation of EEC currencies and with short-term monetary support.

When I read that I thought that it was the initial phase, and wondered what would happen in the later phases. I turned over the page and found that that was the end of the policy implications, and that all we had was the timetable.
The explanatory memorandum to the document R/241/73 was not signed by any Minister. It just said "HM Treasury. 10th April 1973 ".

Mr. John Davies: I should say in fairness to the Government that the lack of a signature was a matter of a technical, timing problem rather than any delinquency on the part of the Department concerned.

Mr. Spearing: I am obliged to the right hon. Gentleman. It was a Government of which the right hon. Gentleman was a member.

Mr. Davies: No.

Mr. Spearing: It seems less than frank that in talking about the objectives the document speaks of the initial phase and does not continue. The right hon. Gentleman says that it was not produced by a Government of which he was a member, but it was dated 10th April 1973.

Mr. Davies: The hon. Gentleman is correct.

Mr. Spearing: The Explanatory Memorandum for R /731/73 is dated 1st May 1973. I think that the right hon. Gentleman was a member of the Government then. It says:
 This document is therefore no longer a draft but is the text of a regulation in force
It repeats the words I read earlier about the introduction of a common currency, parities, irreversibility and so on. On page 3 of the regulations we read:
Whereas the conferment of these responsibilities constitutes merely the first stage in the progressive development of the Fund ; whereas it is therefore important that the statutes of the Fund should be drawn up in such a way as to permit the scope of its activities to be gradually extended ; whereas it is necessary to establish the Fund if Community objectives are to be attained, in particular as regards the progressive harmonisation of the Member States' economic policies, the proper functioning of the Common Market and the establishment of economic and monetary union.
So we are going quite a long way further along this road, even to the extent of
 the progressive harmonisation of the Member States' economic policies".


One might expect something to be said in the accompanying explanatory memorandum from the Government, but it says very little. It shows that R /731/73 is an expansion of an earlier document, R241/73. The Memorandum is dated 1st May 1973, unsigned and with no mention of the Treasury.
In these debates we have had a succession of incomplete documents and incomplete and misleading explanatory memoranda. I do not want to do my hon. Friend the Minister an injustice, but to that list we can now add a misleading speech from the Dispatch Box.
I fear that it goes even further than that. The Scrutiny Committee has had a look at these documents. We have been given an extract from what I think is a forthcoming report from that Committee— paragraph 2 of the Committee's 12th report. The Committee goes into this matter— because it is its job to scrutinise this sort of thing— and says:
 The Committee noted the objects for which the Fund was established in i973 (as set out in Document R/731 /73) as being primarily for promoting the reduction of margins of fluctuation between Community currencies, interventions in Community currencies on the exchange markets, and settlements between Central Banks leading to a concerted policy on reserves. The Fund also had a responsibility for concerted action in the Community exchange system ; for multi-lateralisation functions in relation to interventions by Central Banks in Community currencies and in relation to intra-Community settlements ; and for the administration of the short-term financing provided for by the Agreements of 1970 and 1972 between the Central Banks.
That is jargon to many of us. It may mean something to people concerned with international banking, but there is nothing whatsoever there from the Scrutiny Committee, which is supposed to look at these things, about progressive harmonisation of economic policies of member States.

Mr. John Davies: It was unnecessary to be there.

Mr. Spearing: The right hon. Gentleman says that it was unnecessary to be there. I am always willing to be corrected in the line of logic that I am pursuing. No doubt the right hon. Gentleman will say why he thinks that it does not need to be there. But on my reading of these documents, as an ordinary back-bench Member, I should have thought that the implications of the

European Monetary Co-operation Fund— and this last document in a long line of documents which hastens its expansion and, therefore, hastens its objectives— are very much more than the House has been told about.
The motion before us and the speech from the Minister do not in any way question the objectives of this fund. All that the motion does is to reserve on the methods which are being adopted to achieve those objectives. We have had no reservation whatsoever from the right hon. Gentleman or in any of these documents I have quoted concerning their objectives.
I find that unacceptable. There has been a great deal of talk recently about manifestos. The manifesto which the Foreign Secretary quoted in his speech to the Council of Ministers in Luxembourg on 1st April last said:
 We would reject any kind of international agreement which compelled us to accept increased unemployment for the sake of maintaining a fixed parity, as is required by current proposals for a European Economic and Monetary Union.
I shall not say that this is immediately and necessarily counter to what I have said about convergence of the economic policies of member States, because there may be a chink in logic through which one could move. However, it has a great deal to do with it, because the acceptance of increased unemployment is part of the choice of economic management of any member State— quite clearly.
If we are not going to accept economic and monetary union with that tie in it— which the document I have read certainly says is there— then the spokesman of the Government has come to the House at this early hour of the morning and has kept from this House—

Mr. Roper: Oh!

Mr. Spearing: My hon. Friend does not agree. But the Government spokesman has kept from the House the implications of the European Monetary Cc.-operation Fund, which as I read it is, if not contrary to a manifesto commitment, at least near enough contrary to a commitment so as to call the whole thing into question.

Mr. Roper: My hon. Friend has no doubt had a chance to read the instrument we are now considering as distinct


from a number of other instruments from which he has quoted at some length. If he reads through this instrument he will see that the new Articles 3, 4, 5 and 6 are being substituted for those in the Council Regulation 907/73, which established the European Monetary Co-operation Fund, and he will find a set of pragmatic practical proposals which in no way refer to a linked rate of exchange.

Mr. Spearing: I do not doubt what my hon. Friend has said. I have read the new articles. As I understand it the document R/3594 concerns the expansion of the function. It does not necessarily amend or cancel the other points I have made. It expands what is already there and is therefore adding a small additional function, through machinery about which the Minister has some doubts. While I agree that my hon. Friend may be factually correct I do not believe that that negates :he general thesis I have tried to put forward.
We have been under pressure here in the past few months on these matters. Our debates have suffered from procedural and information difficulties, and difficulties concerning timing and the time at which those debates have taken place. On the day after the conclusion of the Community negotiations, when the interpretation of the budget and of economic and monetary union have loomed large, we have not been given the proper facts. In this House, in this Sitting, when I asked the Foreign Secretary about the future of economic and monetary union he tried to laugh it off. He said that it was just as far away as disarmament. Do these documents show this?

Mr. Roper: Yes.

Mr. Spearing: I will leave the House to decide that.

3.12 a.m.

Mr. J. Enoch Powell: We are once again presented in the document before the House with a dilemma which we have already encountered several times in this series of debates. It is the dilemma between considering these proposals at a relatively early stage and considering them at a relatively late stage. This evening we have had the document, accompanied by an intimation from the

Minister of State that the Government think it extremely improbable that it will be adopted by the Council of Ministers in anything like its present form.
Therefore, any anxieties we might have about its content and form may well prove in the event to be irrelevant. From that point of view it is hard to feel that our debate is a practical debate. Even the argument, often put forward, that by having these documents before us at a fairly early stage we are enabled to influence subsequent action upon them and to impress the Government with a sense of what should be done, hardly applies on this occasion because the Minister more or less made a clean sweep of it before the rest of us could get at the document.
I confess my belief that it is more practical for these documents to come to the House at a relatively late stage in their gestation. I am nevertheless sure that it was right for the Scrutiny Committee to draw attention to this document. There is a certain paradoxical appropriateness in our considering it in this day's sitting. The Foreign Secretary at an earlier stage of this sitting made almost merry with the notion that economic and monetary union in the EEC was visible on the furthest of possible horizons. If he had used an alternative metaphor, it is a date, he was telling us, as remote as the Greek kalends.
Now, in the same sitting, we are reminded of what has followed from that summit meeting in October 1972— the summit meeting which fixed 1980 as the intended year of the achievement of economic and monetary union, an intention which, despite some milder expressions of subsequent communiqués, has not been disavowed or laid aside by the EEC.
The Minister of State in his evidence to the Select Committee and again this evening treated the proposal as one of machinery. His words to the Select Committee were that he did not see the proposal as having
…any particular significance in relation to any future move towards economic and monetary union.
If he does not, the evidence that it is such is writ large upon the documents.
The explanatory memorandum which accompanies this document says that as a result of the proposal
The EMCF would become responsible for co-ordination of the domestic and external


monetary policies of the EEC Member States … 
Those words may be mistaken, but they are far reaching. The explanatory memorandum to the document itself says :
 That is why the Commission proposes that the Fund should henceforth be made responsible for co-ordinating the internal monetary policies of the Member States of the EEC in so far as they affect interest rates, capital movements and foreign exchange rates:'
That does not mean, if words mean anything, that it is thought to be a convenient forum in which there could be chats between representatives of independent States as to how respectively they intended to conduct their affairs. The word "co-ordinating" presumably has its normal meaning and the phrase "responsible for co-ordinating" equally has its normal meaning. What is to be coordinated is the heart of the economic policies of the countries involved.

Mr. Roper: Perhaps the right hon. Gentleman would agree that in these matters it is better to turn to the instrument itself. If he will turn to page 3, he will see that Article 4 deals with the matter in some detail and says:
 The Fund shall be responsible for arranging continuing and prior consultation … 
— which is close to the right hon. Gentleman's suggestion of friendly chats.

Mr. Powell: In the enactment clauses the document does not fulfil as yet what is the declared object, but at least I have disposed of the inability of the Minister of State to see that the proposal has any particular significance in relation to any future move towards economic and monetary union. Undeniably it has a significance and indeed it must do so. This is one of a series of documents that follow from orders given at the summit meeting which took the decision in October 1972 to aim at economic and monetary union by 1980.
We now arrive at a dilemma with which the whole debate on Britain and the EEC is shot through. At any stage in this debate it is possible to expose the contrast between what is actually being done at that moment and what are the professed intentions. But we cannot resolve that dilemma by simply treating the professed intentions as appropriate to be disregarded, by simply treating them as mere

professions which will continue not to have any corresponding consequence in what is binding and mandatory— by assuming, for example, in this particular case that at no time is it intended that there shall be a body and an organisation responsible for co-ordination of those economic policies of the member States which have an impact upon the value of their currencies and consequently upon the possibility of maintaining a fixed parity between the currencies.
The right hon. Member for Knutsford (Mr. Davies) over and over again in these debates has reminded us that the European Economic Community is what it professes to be. It is to be a common market in which there will be a common regime, a community, at any rate in the economic sphere. Such a community is not conceivable unless there is monetary union. If the States themselves pursue policies which result in different impacts upon the value of their money, so that they can be kept in interrelationship only by exchange rates which either float or are from time to time adjusted and altered, there cannot be a workable common agricultural policy aiming at a co-ordinated scheme of identical prices for the whole Community, nor can there be a Common Market ; for the very fact of the division of the Market by the different exchange rates, by currencies which are influenced by different national policies, is a negation of a Common Market.
It is not a mere example of the celebrated French logic that whenever the leaders of the EEC review their position they identify economic and monetary union— of course, once again the right hon. Gentleman is quite right in saying that economic and monetary union is not two things, it is one thing— they identify economic and monetary union as an indispensable aim to which they must continuously be moving. Therefore, we cannot escape from this contrast between the very nature of the Community and that independence of national decision which the Labour Party has declared that it embraces and which many far beyond the ranks of the Labour Party are determined to maintain.
As the manifesto of the Labour Party said, European economic and monetary union requires whatever is necessary in the parts of the Community in order to maintain either a single currency or else


a fixed system of parities between the domestic currencies. It requires the surrender by the member States of the very heart of their respective economic policies—policies which will influence unemployment, growth and the whole nature of the trade and intercourse between the respective countries and the rest of the world. When control over these policies is relinquished, then indeed the separate States have lost the greater part of what is worth having in self-government.

Mr. John Davies: I was following the right hon. Gentleman in absolute agreement, but I was struck by the word "relinquished ". The whole thesis of the Community is that the rights and duties are shared. The principle of relinquishing seems to me to imply a complete abandonment of a real part in the conduct of one's own affairs. This is not the purpose of the Community.

Mr. Powell: It is relinquished by the parts of the Community, by the States, in order to be assumed by the common government— I mean to import no prejudice by the use of the word "government "— of the Community as a whole. It is a merging of the States into a new State. It is the transformation of the existing independent States into provinces of the new State.
Here, on this day of all days, we are asked to take note of this document, a document dismissed as innocuous by the Minister of State, and in its content, indeed, as the hon. Member for Farnworth (Mr. Roper) pointed out, not really very effective— a document moreover, which the Government and their supporters will not accept in its present form— yet we are reminded by it of the heart and reality of what we should be doing and what we should be solemnly undertaking on behalf of the British people if we were to ratify, in the procedures which are to follow this year, Britain's membership of the European Economic Community.
With its very superficiality, with its very triviality, the document now before us brings us to the solemn heart and reality of the great national decision.

3.36 a.m.

Mr. John Roper: Once again, I follow the right hon. Member for Down, South (Mr. Powell) and have to discuss with him some of the text of

the manifesto on which I— and, in an honorary capacity, he— fought the February election last year.
The right hon. Gentleman referred to the passage in the manifesto dealing with economic and monetary union. It did not, of course, condemn out of hand all kinds of economic and monetary union. It condemned the current proposals for economic and monetary union, a phrase in which I am particularly interested because it was derived from an earlier document prepared by a Labour Party study group on which I served. At the time when we were considering the section of our report dealing with economic and monetary union, it was made clear— I think that I moved an amendment— that what we were condemning was the particular proposals then being put forward for economic and monetary union, which compelled us to accept increased unemployment for the sake of maintaining a fixed parity as is required by current proposals for a European economic and monetary union.
The right hon. Gentleman will know that in the speech which my right hon. Friend the Foreign and Commonwealth Secretary made on 1st April last in Luxembourg, he went into considerable detail— this is paragraph 6— on the problem of economic and monetary union, pointing out that the summit programme
 seemed to us to be dangerously over-ambitious : over-ambitious because the chances of achieving by 1980 the requisite degree of convergence of the rates of growth of productivity and wages rates, of investment and savings, seemed to us to be very small : dangerous because of the impossibility for any country, particularly a country with a relatively low growth rate, to manage its own economy efficiently and provide for full employment if it accepted permanently fixed parities without such convergence having been achieved.
My right hon. Friend went on:
 I understand that much new thinking is going on in the Community on the subject of economic and monetary union and that the proposals now being considered for a second stage in it do not provide for automatic movement towards permanently fixed parities. You will find our objections very much lessened if we can all agree that there can be no question of trying to force the pace, of compelling member countries to accept permanently fixed parities if this means accepting massive unemployment or before their economies are ready.
I quote at length to make clear that my right hon. Friends have never suggested that they are opposed root and branch to


the concept of economic and monetary union as an ultimate objective of the Community. Indeed, in his reply today to my hon. Friend the Member for Newham, South (Mr. Spearing), my right hon. Friend the Foreign and Commonwealth Secretary said that he considered it to be an ultimate objective, in the same way as, when we are pursuing arms control measures within the United Nations and elsewhere, we see general and complete disarmament as an ultimate aim. This is something to which we are moving within the Community.

Mr. Powell: Can the hon. Member conceive of monetary union without either a common currency or an irreversibly fixed parity between domestic currencies, and, if so, is that not, in spite of all that he and the right hon. Member for Knutsford (Mr. Davies) said, exactly what is already expressly rejected?

Mr. Roper: Monetary union would, of course, be part of economic union and it would take place at a time at which the economies had converged, at which there would not be vastly diverging rates of inflation, at which there would be community-wide instruments such as the regional fund, not on the petty scale which now exists but on an adequate scale, to deal with unemployment in certain regions. We would see a Community which would have both economic and monetary policies. At that time, I believe, in the same way as within these islands we have economic and monetary union, we would have a wider-scale economic and monetary union which would involve a common currency for many purposes, if not necessarily for all.
I had hoped that I would be able to be grateful to the Minister who introduced this debate for his explanation of the slightly odd take-note motion which he has put down. I have previously expressed my dissatisfaction with this type of motion which attempts to add a substantial rider. The one we have tonight is somewhat enigmatic and I hope that before we agree to this instrument the Minister will explain in a little more detail which matters of organisation he wishes to see dealt with.
I do not think that I intend to carry my dissatisfaction with the take-note procedure into the Division Lobby

tonight, but this form of motion with a rider, particularly of the vague character of the one now before us, seems to be not particularly helpful. I feel that Ministers can convey any reservations they have much more adequately in a speech than in an unclear form of words tacked on to a take-note motion.
I hope that the hon. Member for Kensington (Sir B. Rhys Williams), if he catches your eye, Mr. Deputy Speaker, will be able to tell us a little more of the opinion which was given by the European Parliament on 6th February 1975 about this instrument. I see that the hon. Member was personally present at the committee meeting which adopted that opinion almost unanimously. There was one abstention. Of course, the hon. Member might have been the abstaining member of the committee on that occasion. but I gather that he was not.
Paragraph 4 of the opinion by the Committee on Economic and Monetary Affairs states that the Committee remains of the opinion that even in its new form the fund will not of itself constitute an effective instrument of Community monetary policy unless economic policy is implemented on a Community-wide basis and the responsibilities of the Community institutions to this policy are strengthened. I should be most grateful if the hon. Member for Kensington would explain what was in the mind of the committee when it made this reservation. It could perhaps have been better explained in the document.
I turn to the point referred to in passing by the Minister. It concerns the slightly unusual arrangement for the location of the European Monetary Cooperation Fund. As I understand it, the fund is at the moment operated from outside the Community by the Bank of International Settlements. That bank does not choose to have its headquarters in any of the nine countries of the Community but in Basle, Switzerland. It may be that that is an appropriate way for the Community to operate, but from what my hon. Friend the Minister of State has said it seems that there is a splendid building standing empty in Luxembourg. I wonder how much rent we are having to pay for that empty building. I wonder whether my hon. Friend the Minister of State can tell me what waste of resources is represented by that empty building. Perhaps


that is a matter of organisation which my hon. Friend finds not altogether satisfactory.
My hon. Friend referred to another matter which is not altogether satisfactory — namely, the relationship on the governing board of the European Monetary Co-operation Fund between the central banks and the Treasuries concerned. We know that relations between them sometimes run more smoothly than at other times. I understand that the International Monetary Fund has for some time operated on the basis of co-operation between central banks and Treasuries. Perhaps my hon. Friend can explain why a system which has been satisfactory for the IMF appears not to be satisfactory in the case of the EMCF.
My hon. Friend referred to more practical and direct ways of improving the organisation. I should be most grateful if he will give us some further details. In spite of what has been said by my hon. Friend the Member for Newham, South and the right hon. Member for Down, South, the changes which arc being made to Regulation No. 907/73— it was not, I think, on,: of the regulations quoted by my hon. Friend the Member for Newham, South--are practical and sensible ways of gradually increasing mechanisms for consultation and co-operation within the Community. That surely is the sort of co-operation that my right hon. and hon. Friends have come to appreciate during the 12 months since they took office and since they have become more aware of the workings of the Community.

3.48 a.m.

Sir Brandon Rhys Williams: I join the hon. Member for Newham, South (Mr. Spearing) in his protest about the time at which we have to consider this important subject. It is wrong that the House should be expected to begin a debate of this kind after half-past two in the morning. It is difficult to take a sparkling or favourable view of the document which has been put before us at such a time.
I must also express a criticism of the Minister of State. He poured a great deal of cold water on the Commission's proposals. What he said on the way in which he would prefer the Commission to be proceeding was so vague as to be meaningless. I must also protest, as did the hon. Member for Farnworth (Mr. Roper),

about the phraseology of the motion. It does not just ask the House to take note but includes some vaguely disparaging indications without being at all specific.
What we are considering is a very small proposal. As it is clearly common knowledge that it is unlikely to make headway, perhaps we need not concern ourselves too much with the details. However, the important issue is raised of economic and monetary union. One has only to say those words to find the vultures circling round looking for signs of carrion to pick over. The concept of economic and monetary union seems to frighten some people so much that they work themselves into a pitiful state of the terrors at the very thought of what it means. Perhaps it might help them to calm themselves if they asked what a country like Britain, which depends on trade and investment, could hope to gain from economic and monetary disunion. Surely, it must be to the benefit of our traders and investors that we should work towards conditions of greater stability and greater predictability in the world economy. Although we may differ whether we should move forward in the direction of unity or possibly through still greater freedom, we cannot want to lapse into a state of anarchy.
Many people may wonder whether in the last few years democratic economies have been going forward at all in their relationships with each other. Within the Community we have passed resolutions on economic convergence, but in setting up the European Fund in 1973 without a fund and without even any staff the Council merely, in the famous phrase, legalised anarchy and called it a constitution.
Many people who feel that in going forward with floating rates we achieved something useful— and I have been one of them— may not agree that what we are suffering at the moment is anarchy in the exchanges but, if not anarchy, the floating rate system we have enjoyed since the Nixon shock of August 1971 has brought dangerous instability. It has brought loss of confidence, lower investment and the almost uninsurable risks of the currency markets which make inflation harder to control. It is certain that we have to admit that we are not managing the floating rate system as well as we might.
Central banks have done much by their co-operation with each other. The Bank for International Settlements has covered itself in glory, and the IMF has done what it can. But, although things might have been much worse, they could have been much better. The democratic countries, in spite of returning to freer markets for their currencies, are slipping away from freer movement of capital and are risking the loss of wide and relatively undistorted markets for the exchange of goods and services built up under the Bretton Woods system. The oil crisis has not made matters any easier.
Without the political will to keep their currencies together, without gold, without a single dominating financial centre and without any effective monetary institution, the democracies cannot keep their economies in line and, as a result, confidence of trade and investment are suffering. The system has, worked better than many experts feared when we had to abandon the Bretton Woods system, because informal co-operation has reached a much higher level than many people realise.
The new proposals from the Commission merely give a formal nature to procedures of co-operation and consultation which are already well established although not publicised. That was recognised by the Minister of State in his speech and in his evidence to the Scrutiny Committee.
No doubt the monetary authorities of the Community and of the democratic countries have learned a lot in the course of practice of the floating rate system. We have abandoned the false start of economic and monetary union achieved in stages by a monetary sleight of hand without either political or economic union having first been achieved.
It is instructive to compare the text of the new proposals from the Commission with those that were adopted in 1973. The new text is generally weaker. The references are to be deleted to the progressive narrowing of margins which was the heart of the Werner concept. Intervention by the fund in Community currencies perforce had to be abandoned because the fund does not have any funds, and the new text abandons the idea of a concerted policy of reserves.
In effect we are seeing in this document the end of the old snake concept which frightened people so much when they started to study the implementation of economic and monetary union, and although we still retain in the text the idea of
 the total and irreversible convertibility, at irrevocable parities ",
no one who has been associated closely with the thinking of the Commission or other monetary authorities closely concerned with the policy of the Community believes that there is now even a dim idea of economic and monetary union by 1980. It is simply not spoken of any more. But the alternative remains of the introduction of a common currency. In this area much more thought needs to be given. We have here only half a document, and that gives some reasons for anxiety.
There is no mention of a Community unit of account. It remains in Article 5 of the Statutes in terms of gold. Whatever or may think about the desirability of that one has to agree that for the time being, at all events, the gold basis is out of fashion, if not obsolete. The Commission has come down in favour of the snake in the basket, a new concept, with the basket containing unfortunately in the case of the Community, some bananas as well as some hard nuts. I am afraid of what will happen if the unit of account is revised on the basi of a basket of currencies because the. will then always be one unit of currency which is stronger than the unit of account. That does not seem too good a basis.
Some other questions have to be asked. What is to happen as regards the relationship of the Fund— and to the funds of the Investment Bank too— to the Council, the Commission, the Economic and Social Committee and the Contact Committee, apparently a new body referred to in this document. Where does the European Fund fit in? And do we want the fund to be subject to political influence like the Bank of England or the Federal Reserve Board, or relatively independent like the Bundesbank and sited away from a political centre? As regards the premises in Luxembourg, I believe a single room has been taken so that the Fund appears to be sited within the Community, but it is operated in fact from the


Bank for International Settlements in Basle.
What sort of man will be chosen to be the first Director-General? What have the Commission in mind? Will he be the embodiment of the elusive European monetary personality of whom President Giscard d'Estaing has spoken or just a faceless man at the end of a Telex machine from Basle? The latter seems more likely.
It seems to be the general opinion in the Commission and the expectation of those who are well-informed that this draft will make little progress, and therefore inevitably our debate is rather academic. The hon. Member for Farnworth (Mr. Roper) in taking the trouble to ascertain what happened in the committee where I have the honour to be vice-chairman, was simply confirming the obvious fact which, in the committee we had to recognise, that these are modest proposals and that, even if carried through as they are, they carry us only a short stride to economic and monetary union and much remains to be done. Only when we have settled the basic policies will the practical aspects begin to take care of themselves. It is futile to try to take care of practicalities without settling basic policies.
As Rapporteur in the European Parliament for questions of Economic and Monetary Union, I welcome the Commission's initiative. It is what I have pressed it repeatedly to do. But it must advance on a broader front if it is to achieve anything of value.
In the Conservative Party at Westminster, we recall the success of the European Payments Union, launched 25 years ago. We would like the European Monetary Co-operation Fund to enjoy a similar success as a practical but not over-ambitious project. But we treat the Commission's proposals with some caution. On the road to economic and monetary union, we do not want another false start.

4.0 a.m.

Mr. Robert Sheldon: The right hon. Member for Knutsford (Mr. Davies) asked what steps were being taken towards the convergence of monetary policy. This was a matter echoed by most if not all right hon. and hon. Members who spoke in the debate.
When we talk about a convergence of monetary policy, I recall that this was the aim put forward late in 1969 or in 1970 which enjoyed a burst of publicity and acclaim well beyond what the facts as they then were ever warranted. For such a move towards economic and monetary union there was such an excess of enthusiasm over the facts as to be almost beyond belief.
As for the aim itself, of course one can find many aspects of life from disarmament to any other form of idealism to which, eventually, in a better world than that which we currently inhabit, we hope to be able to move. But the bogy man of such a scheme was rapidly taken up by a number of right hon. and hon. Members in this House who really believed that there was a scheme afoot to enchain and imprison our right to operate our economy in the way that we wished.
I find it inconceivable that people really believe this to be true. But I am convinced by what right hon. and hon. Members say that they take this view. it is not one which I share. The Government believe that these are matters on which we have to proceed on day-to-day assumptions on a day-to-day basis. Anyone who assumes that we have been moving in this direction, let alone to that exalted goal, must be ignorant of what has been happening.
So far from a convergence, there has been a very considerable divergence of exchange rates, monetary policies and rates of inflation which underlie much of that, as well as a certain amount of discord about which no one can be happy but which does not lead to and cannot be the prelude to the kind of convergence which certain right hon. and hon. Members oppose.
When we look at this proposal, we are not looking at some scheme which certain people dreamed about five years ago and do not appreciate today that the dream has long since faded. We are talking about the problems of Europe now. The Government's intentions are directed towards practicable and realisable goals.

Mr. Eddie Loyden: Is my hon. Friend suggesting that the EEC, given the amalgam of national States, has made any inroads into


the concept of an economic Europe within which there would be assistance and remedies for economic problems? Is there emerging a European economic concept in which countries with a balance of payments surplus would assist others?

Mr. Sheldon: My hon. Friend has put forward an important point. We are talking about ways of making that kind of inroad into those problems where member States can be of assistance to each other. We want countries which are adopting certain economic, monetary, and other policies to get together and see the impact of these changes with the kind of consultation for which we would hope. I am not referring necessarily to member States, but to any grouping of countries with any kind of common interest. We do not want a subterfuge to impose fixed rates of exchange which will bind countries' economic policies. Such a concept would be wholly artificial. The draft regulation does not advocate a move towards fixed parities. It presents a case for better machinery for ensuring that kind of consultation.
The right hon. member for Down, South (Mr. Powell) was worried about loss of independence over national decisions. If that were true, it would be a serious matter. The concept of economic and monetary union would mean that, to maintain the relationships between the various standards of living in the face of changes which were not equal throughout the Community, vast financial flows would be needed to overcome the inherently different inflation rates in the member States, the different social systems, and the different ways in which the peoples of the Community behave. I think that almost all who have commented on these matters have underestimated the size of the financial flows required to offset the rigidities which frighten so many right hon. and hon. Members.

Mr. Spearing: I appreciate the problems of implementing some of these policies, but is my hon. Friend telling the House that the objectives outlined in R/731/73 dated 26th March 1973 have now been withdrawn?

Mr. Sheldon: The document that we are discussing deals with the more mundane subjects of consultation and the

exchange of information. The innovations that we are discussing do not concern tighter control of exchange rate policy. The draft regulation refers to the great changes in monetary relationships since the EMCF was set up. That is the answer to my hon. Friend. But we are here concerned with improving machinery and methods for consultation.
My hon. Friend the Member for Farnworth (Mr. Roper) asked a number of questions. He mentioned the building at Luxembourg. I assure him that it is reserved for the EMCF and that no rent is payable for these vacant premises. I am sure that he will be pleased to be assured that there is not, as he suspected there might be, any waste of money.
He asked in what practical ways consultations could take place. They are the ways that we should like to be explored and developed. The methods, consultations and discussions come first and the machinery is then built to suit the requirements, not the other way round. It is not as though there is nowhere for these discussions to be held. What we want to do is to improve the facilities. The practical ways are the joint borrowing scheme and within that there is the practical problem that we had with the medium-term loan to Italy last December. That was a valuable example of assistance and consultations — the Community met to solve the serious problems of one of its member States.
My hon. Friend the Member for Farnworth mentioned the rôle of the finance ministries. Both the banks and the: finance ministries are represented on the Monetary Committee. As anyone interested in these problems knows, a number of points of contact exist now. If we are to create another, one wants to know its precise nature and the reason for it. Those we now have are not perfect, even for the limited purposes for which they were set up, and to make use of them this kind of consultation has to be extended in other directions.
We look forward to receiving the views of other member States and hearing how the machinery can help, for machinery would seem to be not the first requirement. We hope to find much sympathy for the views that we have been expressing.

Question put and agreed to.

Resolved,

That this House takes note of Commission Document R/3594/74 and of the Government's intention, while co-operating in the improvement of monetary consultations in the EEC, to question the suitability of the organisational measures proposed.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

Orders of the Day — ULSTER DEFENCE REGIMENT (TRAVELLING ALLOWANCE)

4.15 a.m.

Mr. J. Enoch Powell: I recollect having frequently replied to Adjournment debates—not often at so advanced an hour—but, curiously enough, having almost completed my 25th year as a Member of this House, this is the first occasion on which I have been the initiator of such a debate. I am inclined to think that I—and consequently, the Under-Secretary of State—may not have been fortunate in terms of the day upon which I hit for this new experience.
Nevertheless, the hon. Member will not expect me to apologise, in the light of the importance of the subject, because on this at least we shall be agreed— that the recruitment and the morale of the Ulster Defence Regiment is of even greater importance now than it was in the circumstances that existed when that force was first devised, for in the improving—I am sure they are improving— circumstances in Northern Ireland, with the role of the Regular Army being gradually modified and the police, on the other hand, extending their proper functions, there is an even more important place for this special force—a unique corps or territorial force devised for Northern Ireland.
Anything which causes justified dissatisfaction amongst its members, and anything which deters recruitment or lowers the status of that force, must be regarded as contrary to the general interest.
The particular aspect which I wish to raise is that of the motor mileage allowance which is payable to members of the UDR for travel between home and duty. Perhaps this will be clearest if I set out first—I think correctly—the three

forms of allowance which exist. One is the official duty allowance for travel on duty, which represents full reimbursement of the cost, in the fullest sense. The second is the Regular Army rate, which falls far short not only of full reimbursement but even of the public transport rate. The third is the public transport rate, which endeavours approximately to match what would be the cost of carrying out the equivalent journey, on average, by public transport.
Having set out the three possibilities, let me say straight away that it seems to me entirely right that where public transport is available for a journey from home to duty it would be quite unacceptable for the public to bear more expense than that, just because an individual chose the superior convenience of using his own private motor transport. I regard the principle of the public transport rate as one which, in itself, is entirely logical and justified.
What I advance is the proposition that in the circumstances of the UDR in Northern Ireland as it is today the reasons which render the public transport rate justified and rational do not exist— and that in two important respects. First, there is the question of the availability of public transport, for clearly it is unreasonable to say to a person "You shall be paid no more for the use of your car than the public would pay for your conveyance by public transport ", if there is no practicable possibility of his being conveyed by public transport. Over a great part of the area where the UDR and its members live and operate there literally is no public transport. I speak from personal knowledge of an extensive rural part of Northern Ireland where members of the UDR live and are required to operate. There is no available suitable public transport, even in the daytime, for many of the home-to-duty journeys. But these journeys are frequently performed at times when even if there were public transport it would not be operating, for instance, where tours of duty end, as I believe they not infrequently do, at 5 a.m.— a thought not far remote from our own minds at this moment.
The Under-Secretary gave an informative Written Answer on 2nd December last on the subject of motor mileage allowances. He set out the particulars of the public transport rate and explained


the way in which it was assessed. Then in small print and one should always read the small print— there followed a note saying:
 This rate applies to the use of private cars, not requiring special permission, on official duty journeys including regular journeys between the place of duty and the place of residence or employment ".
Then there follow these words:
 and particularly over routes adequately covered by public transport."—[Official Report, 2nd December 1974 ; Vol. 882, c. 333.]
What is the point of those words in the definition of the application of the public transport rate if a public transport rate is to be applied whether or not there is any public transport?
The significance of the expression
 This rate applies…particularly over routes adequately covered by public transport ".
is that where routes are not adequately covered by public transport, or are not covered by it at all, the discretion exists for a rate other than the public transport rate, namely, the official duty rate, to be taken into consideration. By his statement to the House, the Under-Secretary has indicated that there is an agree with the policy that
 particularly over routes adequately covered by public transport 
the public transport rate should apply. But the Under-Secretary has indicated that it by no means necessarily applies to all
 duty journeys, including regular journeys between the place of duty and the place of residence or employment ".
So I establish, first, that on the hon. Gentleman's own admission there is a choice, a discretion. The Department has reserved to itself a discretion whether to pay at the public transport rate or at some higher rate in those circumstances. Otherwise, those words would be entirely pointless, and I am sure that pointless words would not have been inserted in so careful a statement.
Second, I have established that in much of the area concerned there not only is no adequate public transport ; there is no public transport at all, and there is no public transport, a fortiori, operating at the hours at which many of these regular journeys are performed.
But there is a third and, in my view, much more important consideration. I have confirmed and checked the fact to which I draw attention. That is that the UDR soldier has to travel to and from duty with his uniform and invariably with a weapon, and that consequently he cannot be allowed to travel on public transport alone, with uniform and arms, as he would be immediately a target. That may be not so easy to imagine for those who live in other parts of the United Kingdom, but for those who know Northern Ireland it is a self-evident truth that it would be perfectly crazy, dangerous to the man himself and, in some places, undesirable to public order, if he were to seek to travel as he is required to present himself, with uniform and arms, on public transport. So by the very nature of the regular duty journey without "special permission "— I am quoting the words of the regulation— from home to duty, he simply cannot use public transport, in the nature of the case, even if it were available.
Therefore, I claim that in the circumstances of the UDR operating as it is today in Northern Ireland, use should be made of the discretion which clearly exists to apply the official duty rate. It may be argued that the Regular Army, travelling between home and duty, is paid at an even lower rate ; that the Regular Army's rate is on a lower scale than the public transport rate. But then, of course, there is virtually no such travel by the Regular Army under the conditions of Northern Ireland, either in Northern Ireland or in conditions which are comparable with those which exist today. So that comparison does not exist and that problem does not arise.
Then there is the point that the Army Cadet Force and the TAVR operate with the public transport rate of motor mileage allowance. But those forces in Northern Ireland are not required to travel to duty in the circumstances that soldiers of the UDR are required to travel to duty. The Army Cadet Force and the TAVR are not carrying out the same regular, uniformed armed journeys from home to place of duty, to place of patrol, that the UDR does in the rural and other areas of Northern Ireland. So the Government are capable of treating the case of the UDR on its merits, in its circumstances, without any repercussions or


unfairness as between the UDR and other forces.
I submit in summary once again to the hon. Member that this discretion exists, that in the very terms of the discretion it is applicable to the circumstances which apply in Northern Ireland. and that the conditions of operation of the UDR are such that it is only fair that they should be permitted the official mileage rate for their home-to-duty journeys.

4.29 a.m.

The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown): I naturally want to congratulate the right hon. Member for Down, South (Mr. Powell) on having completed almost 25 years of service and having been fortunate enough to be drawn in the ballot for the Adjournment debate tonight. I cannot necessarily thank him for having to reply at this hour of the morning, but I certainly would not blame him, either, for the time that the House has taken on its previous business.
I am grateful to the right hon. Member for raising this matter this evening since it gives me the opportunity to clear up any misunderstanding that may have arisen regarding travel expenses for members of the Ulster Defence Regiment.
I should also like to take this opportunity to pay tribute to the work done by the men and women of the UDR who give up their time for this worthy cause. The presence and activities of this local, nonpartisan force, in support of the Regular Army is of the greatest value in establishing and maintaining peace in Northern Ireland. I have had the privilege of seeing at close quarters these men and women at work and have been heartened at their high morale and determination to do their bit towards the defeat of terrorism. I am sure that the Ulster Defence Regiment will have a long and continuing rôle to play in the security of Northern Ireland.
I also appreciate the problems which some members of the UDR face in travelling to and from their places of duty, and which the right hon. Member has highlighted. Many key points which have to be guarded by the UDR are in isolated places, and there is no doubt that some people do have to travel considerable

distances at difficult times of the day and night to reach them.
This is, I believe, at the root of the problem although the question is usually expressed in fairly technical terms about the relative merits of the various rates of motor mileage allowances. This has been propounded by the right hon. Gentleman.
The right hon. Member has referred during his clear exposition of the case to the various types of motor mileage allowance. I think it would be helpful to the House if I first describe how these allowances operate.
The public service as a whole uses two rates of allowance— the official duty rate and the public transport rate. The official duty rate is paid when special permission has been given for a private vehicle to be used on an official journey when alternative official or public transport is not available or would cause serious delay or marked inconvenience. The rate is based on the total cost of running a car and takes into account the capital investment, depreciation and so on. The rate is kept under review and, for example, the current rate for a 1500 cc car is 7.4p per mile— plus, if appropriate, an official passenger allowance of a halfpenny per mile.
The public transport rate, on the other hand, applies when an individual chooses for his own reasons to use his private vehicle on an official journey. No special permission is required. The rate is assessed on the cost of all forms of public transport, and it is geared to fluctuations in the Retail Price Index fares item. The Department obtains an advantageous rate on public transport for Service men, and this is reflected in its public transport rate of motor mileage allowance. This currently stands for a family car at 2·8p per mile, plus, again, a halfpenny per mile for official passengers.
The House will note that both the official duty rate and the public transport rate of motor mileage allowance relate only to official journeys. Generally, throughout the public service, no allowance is made for journeys to and from the place of duty.
In the Armed Forces somewhat different considerations apply and it has been the practice for some assistance to be given towards travel costs to and from the normal place of duty. But the individual


is expected to make a contribution. If a member of the Armed Forces uses his car to travel from home to duty he is reimbursed at the rate of 1·7p per mile but has to contribute 50p a week from his own pocket. When the military salary was introduced, it was considered reasonable that a Service man should make some contribution to this expense on a par with the sort of expenditure incurred by his civilian counterpart.
I think this is very fair, and the same rules apply when members of the permament staff of the UDR use their own cars to travel to and from duty. However, part-time members of the UDR, like their part-time counterparts in the TAVR, receive more generous treatment. They receive motor mileage allowance for travel to and from duty at the public transport rate I mentioned earlier, amounting at present to 2·8p per mile.
Nevertheless, the right hon. Member argued that part-time members of the UDR should get more than this because, for one reason or another, he believes that the normal rules should not apply to them. He has rightly argued that public transport may not be available. But it would be hard to differentiate between a member of the UDR who had to use a car and a member of the Regular Army or of the TAVR, either in Northern Ireland or elsewhere, who was similarly placed. Such a concession could have widespread repercussions. I know that the right hon. Gentleman disagrees, but we must consider the widespread repercussions on a matter that operates across the whole of the public services.

Mr. Powell: But it is not the case that they are travelling on the same or even on similar routes to either the TAVR or the Regular Forces.

Mr. Brown: I shall develop the case as I go along and I think the right hon. Gentleman will see the justice of my case. He has argued that the public transport rate at 2·8p per mile is not relevant because one cannot base a motor mileage allowance on a non-existent alternative means of transport. I do not disagree with the right hon. Gentleman on that point but, as I said earlier, the public transport rate is not based on any particular form of transport or journey but rather on the average cost to the Depart-

ment of all means of travelling by public transport.
The right hon. Member argued that, in view of the security situation. part-time members of the UDR cannot safely travel on public transport. But the same considerations must apply to members of the TAVR and, perhaps even more so, to the Regular Forces in Northern Ireland.
I am afraid that it is not simply a matter of instructing Service men in Northern Ireland— the UDR or anybody else— to use private transport and then cheerfully calling that an official duty journey qualifying for the full rate of motor mileage allowance. Not everyone has private transport and, in any event. this would ignore the whole basis on which motor mileage allowances are assessed throughout the public service— I stress "public service "— and it would ignore the reality that, even in Northern Ireland, as the right hon. Gentleman will concede, security conditions vary enormously from one place to another.
The right hon. Member complained, or at least implied, that those who use their cars for travel to duty are seriously out of pocket if they are reimbursed at the public transport rate instead of the official duty rate. I think that it is possible to exaggerate this factor. It would no doubt be true if a member of the UDR were to run a car for the sole purpose of travelling to and from UDR duty. However, most, if not all, of those who run cars use them for other purposes. Reimbursement at 2·8p a mile should at least cover the cost of petrol for the journeys, and they would have to meet the standing costs of running the car whether or not it were used for travel to duty. I am sure he would not suggest that any member of the UDR would purchase a car simply to travel to and from duty. Finally, part-time members of the UDR do not have to make a specific contribution towards their home-to-duty travel costs as do members of the Regular Army. In that respect they have an advantage.
I do not wish for one moment to appear unsympathetic, but we must remember that we are not talking about the UDR in isolation. That is why at the outset I carefully explained the general rules which apply to the public service as a whole and to the Services in particular.


I will accept that the right hon. Member has advanced his case in all honesty and with the best of motives, but he must accept that the UDR is only a part of the total picture. Nor can we ignore considerations of cost. The Army already spends about £2 million a year on motor mileage allowance for home-to-duty travel. Any substantial shift to higher rates of motor mileage allowance could involve a sizeable increase in expenditure in an already tight defence budget.
As I have said, I do not wish to appear unsympathetic, or to underestimate the fact that some UDR members feel a sense of grievance in this matter, but it is equally fair to say that many people in public service in receipt of car allowance from time to time feel similar grievances, and this is why I give the assurance that we are keeping the matter constantly under review.
I hope that what I have said will put the problem in perspective and convince the members of the UDR that the rules which are being applied to them are consistent with the motor mileage allowance rules which apply generally in the Armed Forces, and that it is not possible to single them out for entirely exceptional treatment, much as I should like to do so.
I hope I have said enough to show how much I appreciate the work being done by these men and women, and I trust that, for their part, they will recognise the importance of allowance rules being applied fairly and consistently throughout the Armed Services.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to Five o'clock a.m.